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The Loxton Report

Good afternoon from the reverse mortgage world!

It's been an interesting 90 days!  First it was the election, then the fiscal cliff, then Manti's fake girlfriend (had to work that one in), and now the much-awaited mortgagee letter from HUD detailing what will be probably be the first segment of the (hopefully) last wave of changes to the HECM program.  In this midst of all these changes it's easy to forget that we're seeing the first wave of the 62+ demographic hit our industry and that the future for our business is indeed bright!

For those professionals who work for a mortgage broker or banker (and not a financial institution) there was very good news that hit the wires today (hat tip:  RMD)!  It was announced that the CSBS and relevant state mortgage regulators are introducing a single, multi-state exam that will be initially available for 20 states on April 1st!.  Hopefully, more states will adopt this and further streamline the process for multi-state licensure since this approach is already used for FINRA-registered investment professionals.

An editorial comment to mortgage professionals currently working for banks and not licensed - it would be prudent to start the process of becoming licensed.  

Attention Reverse Mortgage Professionals - Are You Looking For Top-Tier Compensation Combined With A Friendly Culture?

Over the past few weeks, there have been dramatic compensation changes at several firms.

Mortgage professionals that are looking for top-tier compensation from a FHA HECM DE lender along with a unique, originator-centered culture need to call or email us!  Also, if you are a reverse mortgage professional that is experienced in self-sourcing business with strong referral networks please feel free to email me or call 317-557-5113 to discuss your situation.

The Stack Of Stuff From The Field

Note To Condominimum/HOA Professionals - FHA Approval Can Be Made Easier!

Longtime readers of the Report are aware that your author was drafted to be the Treasurer (unpaid, for the record) of a 300-unit, $1.3 million (annual revenue) condo in Pinellas County for about 3 years.

That term (or jail sentence, depending on your perspective) was a fascinating education in how Florida condos were operated.  During that time, the mortgage industry also endured the loss of FHA spot approvals and a period of time in which lenders would not touch the Florida condo market.

Times have definitely changed in the condo market - especially in Florida.  Rather than condo towers 80% empty we're now seeing bidding wars and new towers being planned in several areas.

Along with this new renaissance in the condo market has come a revived interest in FHA approval - especially for clients who wish to do reverse mortgages in non-FHA approved condos.

We have been able to assist several condo assocations in obtaining FHA approval (at no charge) and realize the benefits of more diverse sources of liquidity!   If you are in the condo market and would like to learn more about FHA approval made easier please email us or call 317-557-5113.

Attention Financial Institutions With Troubled Second-Lien Loans -  We Can Help!

There is a slow cancer sitting in the loan books of many financial institutions that has yet to be truly dealt with - residential second liens and HELOCs are about to become the next headache for many bank CLO's.  A recent article did an excellent job describing the issue in detail and what may loom over the horizon for many firms.

Many executive officers of financial institutions read the Report each week.  If you're one of those and would like to know how a reverse mortgage could potentially help mitigate your exposure to residential first and second-lien issues please email us to learn about actual cases where we have turned delinquent home loans into performing assets!


What's Up In The Reverse Mortgage World?

For those that have lived through all of the changes in the business over the last few years we do think you're going to be rewarded for your determination in 2013 as the forward refi boom enters its final innings.  A few weeks ago, a friend asked me (over a few drinks) what the past analogy for what we've experienced since 2007 in the reverse mortgage world was. 

After much superficial thought, here's the best I could come up with:  If you've ever lived in Florida a summertime favorite at pool parties is to take a large watermelon, smear it with Crisco, and toss it in the deep end of the pool.  As anyone who has done this (usually after a drink or four) it takes an incredible amount of determination and luck to successfully end up with it 25 yards later at the other end of the pool while fighting 20 of your friends.  The HECM business since 2006 has been like wrestling with a watermelon in a pool - fortunately, based on early indications 2013 could be a very good year for those licensed professionals still in the business!

In keeping with the "constant change" theme, is it possible that the unloved FIXED SAVER could be the next product du jour in the industry?  While it may be tough to believe, here's something to think about.  If we take a hypothetical 65-year old in a $200k home in Pinellas County, FL after MIP, origination fees, and other fees (don't forget doc stamps/intangible taxes) the L300 ARM will give that client a net available principal limit of about $114,893.  However, the expected rate which determines how much the client receives (based on 10-yr LIBOR swap) is 4.96% in this example.

A quick rise in rates of 100-125bp now gives us an expected rate of 6.0% in this example - and the client's available proceeds are $90,493 (ouch!).  As always, please feel free to email us with thoughts and we'll publish them in our next Report.

However, based on a number of reasons (better addressed in another Report) we believe the fixed rate has a bit more cushion (how much to be determined by the bond markets) that will give it a bit more time before principal limits start to decrease in a rising rate environment (as compared to the L300).

The FIXED SAVER in the example noted above would give the client about $97,893 (assuming rate of 5.06%) - which is 8.1% more than the L300!  We'll see how this plays out over the next 6-12 months but this was an interesting quirk we wanted to share.

Recently, an interesting report crossed our desk from New View Advisors detailing what's been going on the GNMA HMBS and HREMIC arenas.  Since GNMA execution is the source of most of our liquidity in the industry you'll find this report to be of interest.   

The reverse mortgage industry is dead because no homeowners have any equity left in their homes?  Not so fast!  In fact, Zillow.com recently published a great report detailing the fact that over 38% of homeowners have NO mortgage debt against them.  This data validates what we've long suspected - that the potential for the HECM business in the long run is extremely strong.  For the full report please click here. 

While we're at it, Corelogic released a report going further than the Zillow study and detailing equity positions by region and type of mortgage (hat tip:  NMP) across the United Stated.  As one may expect, we are seeing the healing of the US housing market continue and the bulk of underwater properties now concentrated in a select number of areas in the US (which is positive) - please click here to get the full article.

Generally speaking, reverse mortgage production has been (at least loosely) correlated with home prices.  A hopeful sign for business in 2013 are tightening home inventories across the US.  As detailed by Business Insider and Calculated Risk, this should definitively put a floor in home values which is a net positive for the HECM world.

While all the attention is focused on the upcoming mortgagee letter soon to be issued by HUD, there has been almost no attention paid to the potential of rising interest rates.  In a recent post at Business Insider, Mohammed El-Erian of Pimco wrote that we may be entering a more robust phase of the recovery and interest rates may rise sooner than expected.  While we don't predict interest rates or the stock market, it's interesting to see what would happen if rates did rise sharply in a 1994-type move.


A Shout-Out To The Realtors In The House!

We've endured the past few years of housing being an anchor on the US economy.  However, Housing Wire recently reported on a upbeat forecast in which housing will be a significant contributor to economic growth in 2013.  For the full article please click here.  

Calculated Risk has a great follow up to the earlier post above.  In it, they detail how US housing has the potential to add a major percentage of GDP growth over the next few years as we climb back from some of the worst residential construction numbers on record towards historical norms in homebuilding.  It's a detailed piece but well worth the read

It's been a while since we've posted about the Sunshine State.  

Two excellent articles from one of our favorite blogs teach why HOAs have to make sure they engage competent legal counsel before foreclosing on liens for past-due fees - as a former Treasurer, I've seen all sorts of legal advice given.  The first piece is a great guide to collecting HOA dues after foreclosure and the second piece discusses what the new owner is (and isn't) responsible for. 

We've long written (and been critical of) the judicial foreclosure process in Florida and other states.  For the staff of the Report, it is proof that the road to hell is indeed paved with good intentions as states with judicial foreclosures can take 3-4 years in extreme cases for homes to get back to market.  Fortunately, legislation has been introduced to try to speed up the process in Florida.  Let's hope that this does become law - it would be a big shot in the arm for the market to clear homes faster!

The new-home builders in many parts of the nation are doing well.  As we've been writing about for the past few years, at some point in time the lack of supply of new homes would be outstripped by pent-up demand.  This surge in demand has also spread to the Midwest as well!

Realtors - don't forget that the Reverse for Purchase is one of the hottest mortgage products on the market and can help you create more cash buyers!  For more information please email us!

The Financial Advisors Corner

We've written at length in several past Reports about the many changes and rate increases that have hit the long-term-care insurance arena.  These changes, and the resulting uncertainty have caused clients to consider hybrid life/LTC policies to cover their needs in retirement.  In a piece from Investment News (registration required) you'll find a detailed description of this.  

Could reverse mortgages be used to fund a gallon/day wine habit?  We'd certainly hope not, but in Moshe Milevsky's article he does a great job describing the changes to guaranteed income benefits in variable annuities.  While we're on this topic, the staff of the Report are definitely seeing a greater number of reverse mortgage inquiries driven by the need for additional monthly income...

By the way, here is a perfect example of how a reverse mortgage was made to help a client live a better life!


Upcoming Events In The Mortgage And Real Estate Space

Over the years, we've been asked to help spread the word  about numerous industry functions.  If you'd like your local mortgage professional or Realtor event publicised please email us a brief description and we'll include them in our next Report.

Mortgage Professionals in Broward County, FL:  Please see below for the upcoming tradeshow:

Tradeshow March 13, 2013:  Click here for more information.

Mortgage Professionals in Central Florida:

The Central Florida Chapter of the Florida Association of Mortgage Professionals Annual Trade Show will be held on Tuesday, March 5th at the Hilton Orlando in Altamonte Springs, Florida. Don't miss this event with several hundred colleagues from the mortgage industry in attendance plus a informative, 90-minute industry update before the show.

For more information on attending or exhibiting please click here. 


Thanks again for allowing us to invade your inbox.  Have a great week and if we can ever be of assistance in the reverse mortgage world please email us or call 317-557-5113!


For Mortgage, Real Estate, and Financial Professional Use Only.

Not Intended For Consumer Distribution and/or Solicitation In Any Form.

The views expressed above are those of the authors and not of any other firm or lender.
Dennis Loxton, CFP NMLS #362476


The Loxton Report | 4160 35th Terrace South | St. Petersburg | FL | 33711 | US
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