The Government National Mortgage Association (Ginnie Mae) announced that it guaranteed more than $917 million of reverse mortgage MBS (HMBS) in October.

“Ginnie Mae – whose securities carry the full faith and credit of the U.S. government – has been quick to modify and create securitization products that provide additional liquidity to help stabilize the U.S. housing market,” said Thomas R. Weakland, Ginnie Mae’s Acting Executive Vice President. “And for the past 11 months we’ve consistently shown – with industry-wide low Single-Family delinquency rates – that our conservative approach to risk-taking is working for U.S. taxpayers.”

In the aftermath of the national foreclosure crisis, Governor Arnold Schwarzenegger, to help prevent California homeowners and homebuyers from being impacted by fraudulent mortgage practices, has signed legislation increasing consumer protections in the lending market, including providing law enforcement with more teeth for cracking down on deceitful mortgage practices. These bills are aimed at strengthening California’s reverse mortgage laws by providing senior homeowners with greater consumer protections at the time of considering reverse mortgage agreements. These laws make it a felony to commit fraud in connection with a mortgage application, including promoting responsibility and accountability in the real estate market, including the promotion of homeownership in a safe and accountable environment.”

The Governor has signed the following bills:

* AB 329 by Assemblymember Mike Feuer (D-Los Angeles) to establish the Reverse Mortgage Elder Protection Act of 2009 to provide senior homeowners with greater consumer protections, ensuring they are fully informed of the consequences of entering into a reverse mortgage agreement. Specifically, lenders are required to provide prospective borrowers with a clear and informative written disclosure statement, including a written checklist pertaining to the risks and suitability of a reverse mortgage, prior to borrower attending loan counseling.

In a nutshell, the Commissioner explained that from its enactment, the HECM program was intended to operate without any credit subsidy. While one might argue with OMB’s recent assessment, the fact is that OMB’s number is the “governing” number here and accordingly, there needs to be credit subsidy, or program changes, in order for the HECM program to continue operating once the new federal fiscal year begins on October 1. Since the appropriations process is unlikely to provide credit subsidy, program changes are the only viable route for keeping the program operating past September 30.

The Commissioner offered to attend a meeting, or series of meetings, with a delegation from NRMLA to discuss the future of the HECM program and reiterated that policy changes can be made as needed, so we can revisit the principal limit issue and other issues, such as re-engineering the MIP over the months ahead. However, he made clear that they needed to make the change that they are making right now and there is nothing else to be done about it.

Call 1-888-973-8377 to see if the limit change could effect how much you would receive from a Reverse Mortgage.

The U.S. Department of Housing and Urban Development posted Mortgagee Letter 09-43, which announced a new set of principal limit factors for the Federal Housing Administration (FHA) HECM program. The changes will lower the principal limits for the HECM by 10%.

According to the ML, the new principal limit factors must be used for all HECMs which the FHA case number is assigned on or after October 1, 2009.

All loans for which the FHA case number has already been assigned as of September 30, 2009 may be processed as usual. The lender need not change any of the calculations of principal limit or re-disclose to borrowers any changes in the HECM proceeds that the borrower will receive.

The announcement comes after the National Reverse Mortgage Lenders Association worked directly alongside AARP and FHA about what the industry’s options were. FHA felt that since the appropriations process is unlikely to provide credit subsidy, program changes are the only viable route for keeping the program operating past September 30, said a statement from NRMLA.

Source: HUD

The California Assembly passed a bill earlier this week, which is meant to provide an additional level of protection to senior citizens considering reverse mortgages.

Passed by a vote of 49-29, SB 660 requires that a checklist be provided to the consumer prior to the mandatory counseling session and states that any person who recommends a reverse mortgage, with anticipation of financial gain, owes a duty of honesty, good faith, and fair dealing to the consumer.

Senator Lois Wolk, D-Davis, told the Daily Democrat that, “These loans, while appropriate in some instances, can have devastating financial consequences. Because the amount due can fairly quickly exceed the value of the home, borrowers get trapped. They lose their equity and their ability to move into assisted living or other supportive housing, or otherwise provide for long-term care. This measure ensures that seniors have the information they need when making important financial decisions involving their homes.”

The new version of SB 660 includes the following amendments:

1. Specify that a lender, broker, person, or entity shall not be deemed to have breeched the duty set forth by this bill solely based on the actions or omissions of the counseling agency.
2. Provide that compliance with existing law may be cited by a lender, broker, person, or entity as evidence demonstrating compliance with the duties of this bill.
3. Requires the counseling agency to provide the prospective borrower with a written checklist of issues and problems that could arise in the transaction if the prospective borrower seeks counseling prior to requesting a reverse mortgage.
4. Require that the notice that must be delivered to reverse mortgage borrowers highlight certain risks associated with reverse mortgages.

“With the rise in abuses in the reverse mortgage market, this standard is not only appropriate, but also necessary to protect seniors from those who would take financial advantage of them,” said Wolk.

The Senate must now vote on the new amendments, then it can be sent to the Governor for his signature.

Source: Daily Democrat