Reverse Mortgages In The Delaware Valley - Delcosa
Reverse Mortgages in the Delaware ValleyMay 23, 2018
Reverse Mortgages in thePhiladelphia Region
Background on Reverse Mortgages
Traditional Mortgages and Reverse Mortgages compared
Traditional Mortgages and Reverse Mortgages compared
What is a Reverse Mortgage? Home Equity Conversion Mortgages (HECM), aka ReverseMortgages, are FHA-insured loans that allow borrowers to accessthe equity in their homes Common Uses of Reverse Mortgages: Supplement monthly income – seniors on a fixed income Finance home repair and maintenance Pay major medical expenses Advantages of Reverse Mortgages: Non-traditional qualifying (borrow has poor credit and/or low income) No monthly mortgage payment Ability to tap into equity (put cash in your pocket now without sellingthe house) Ability to live in their home until death (or sale/non-occupancy orforeclosure)
The Ideal Reverse Mortgage Borrower A strong commitment to understanding the process Views the reverse mortgage as part of an overallretirement plan with a mix of retirement assets Willing to involve family/heirs in the process Sufficient Income for Taxes and Homeowners’ Insurance Well past the minimum age of 62 Knowledge of repairs needed
Borrowers can Encounter Trouble with Reverse Mortgages Common Reasons for Reverse Mortgage Default (and Foreclosure) Failure to pay property taxes. Failure to maintain homeowner’s insurance. Failure to maintain the home in good repair. Failure to stay in the home as primary residence (less than 6 months peryear) This includes leaving the home for long term medical care! Common Challenges for Spouses & Heirs Surviving spouses who are not co-borrowers or listed on the reversemortgage documents must repay the reverse mortgage amounts after theborrower dies if they want to remain in the home. Other heirs, like children or care givers, must repay the reverse mortgageamounts after the borrower dies if they want to live in or inherit thehome.
The Borrower Concerns with Reverse Mortgages Product not accurately explained or understood byborrowers. Repair contractors and reverse mortgage brokers workingtogether confuses borrower. Servicers are unwilling to offer Repayment Plans whentaxes or insurance become delinquent choosing insteadto file for foreclosure. Widows and heirs often lose the family home.Source:Senior Law Center
What happens when the homeowner passes away?* If a homeownerwants to leave theirproperty to an heir,they should speak withthem about how torepay the reversemortgage. The most anheir can be asked torepay is 95% of thehome’s value (or theloan balance,whichever is lower).
What We’ve Learned About ReverseMortgages in the Five-County Area
Reverse Mortgage Originations - NationwideSource: HUD
Reverse Mortgage Originations - PennsylvaniaSources: HUD andReverse idaFlorida3TexasFloridaFloridaNew YorkFloridaTexasTexas4New YorkNew YorkNew YorkFloridaNew YorkNew YorkNew York5MarylandMaryland6VirginiaVirginiaNew JerseyNew JerseyNew JerseyNew JerseyArizona7New JerseyNew JerseyVirginiaVirginiaVirginiaArizonaNew hingtonWashingtonIllinoisNorth CarolinaIllinoisPennsylvania Pennsylvania Pennsylvania Pennsylvania PennsylvaniaPuerto Rico North CarolinaNorth Carolina North CarolinaIllinoisMaryland
Concentrations of Pennsylvania Older (60 )and Lower Income ( 50,000) HouseholdsSource: 2010 – 2014American CommunitySurvey
Share of HECM Originations to Protected Classes
Share of HECM Originations to African-Americans
HECM Characteristics by County, 2009 - 2016RefinanceLine of CreditInitialMaxInterestFixed RatePrincipal ClaimRateLimit AmountHECM Percent Median Median %3.2% 169,000 260,000Chester618%68084%29336%3.4% 184,000 289,000Delaware504%92782%44039%3.4% 132,000 205,000Montgomery876%1,21986%49835%3.2% 164,000 259,000Philadelphia78015%4,36486%2,97459%5.0% 81,000 125,000Enforcement Area1,06311%8,30685%4,65148%3.2% 169,000 260,000* Terms of HECMs in MontgomeryCounty similar to surroundingcounties, different thanPhiladelphia
Reverse Mortgage Originations – One Lender Example18
Reverse Mortgage Defaults – One Lender Example
Fair Housing Testing of HECM Lenders
Prioritizing Lenders for Testing Created a list of factors examined so far: HEC Contact: Initial Contact: HEC contacted lender seeking information Received Quote: Lender sent potential HECM loan structures with initial info packet Local: Lender has an office in the five county area Number of Originations (in the five county area): A top 15 HECM originators, 2009-2016 A top 15 HECM originators, 2014-2016 Terms of Originations High number of Fixed Interest Rate loans Median Initial Principal Limit in bottom 40% of lenders (i.e., lendingpredominately in low wealth areas) Originations were disproportionately to protected classes: Higher than the five county average % of African-American homeowners Higher than the five county average % of HECM loans to women Default and Foreclosure High Default Rate Foreclosures concentrated in predominately African-American areas (i.e.,40% ); min. 5 foreclosures Begin testing with the lenders who show the most problematic HECMlending patterns.
Prioritizing Lenders for Testing List of lenders with five or more of the eleven factors: (14 total, 12 still active)Lender NameTotal Number ofFactors PresentLender A9Lender B9Lender CLender DLender ELender FLender GLender HLender ILender JLender KLender LLender MLender N777666666655
Identifying pairs of neighborhoods for TestScenarios Census tracts alike on: 2014 sales priceChange in sales pricefrom 2009-2014Zip code sales priceAge of housing stock Unalike on: Predominate racialgroup(i.e., pair similarBlack/White tracts)
Grant TeamReinvestment Fund, Policy Solutions: Ira Goldstein, PresidentMichael Norton, Chief Policy AnalystColin Weidig, Senior Research AnalystAdam Steinberg, Mellon / ACLS Public FellowHousing Equality Center of Pennsylvania: Rachel Wentworth, Executive Director Quint Lerch, Test CoordinatorContact: 215-574-5815
What is a Reverse Mortgage? Home Equity Conversion Mortgages (HECM), aka Reverse Mortgages, are FHA-insured loans that allow borrowers to access . 9 Pennsylvania Illinois North Carolina North Carolina Arizona Illinois Virginia 10 Washington Washington Illinois Maryland Illinois North Carolina Illinois Sources: HUD and Reverse Mortgage
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Background On Reverse Mortgages Reverse mortgages originated in 1960s Housing and Community Development Act - Popularity & support was limited until passed in 1987 - Established Federal mortgage insurance - Created Home Equity Conversion Mortgages (HECM) - Originally authorized FHA to insure 2,500 loans @michaelkitces
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