After two and half years at the helm of the Department of Housing and Urban Development, former HUD Secretary Julián Castro’s political ambitions are far from over. But unlike most politicians, there is one unique factor that goes into Castro’s next move. He has a twin brother who shares similar goals in politics. Will their shared interests create a problem?
Archives for August 2017
Saying it’s losing money on reverse mortgages, the U.S. Department of Housing and Urban Development announced Tuesday, Aug. 29, it will raise up-front fees and tighten limits for the program starting in September and October to avoid having to dip into the U.S. Treasury to cover troubled borrowers.
The reforms, announced in a morning conference call, are designed to stem $11.7 billion in losses since fiscal year 2009 to the Federal Housing Administration, which insures reverse mortgages, a loan available to homeowners age 62 and older. Due to these losses, reverse mortgages have become a drag on the FHA insurance program, called the Mutual Mortgage Insurance Fund, the agency said.
“Quite simply, the (reverse mortgage) program is losing money and can no longer remain viable in its present form,” a HUD fact sheet released Tuesday said. “Today, younger, lower-income homeowners with traditional FHA-insured ‘forward mortgages’ are routinely bailing out the (reverse mortgage) program through the mortgage insurance premiums they pay, placing a significant burden on the overall health of FHA’s Mutual Mortgage Insurance Fund.”
Reverse mortgages are designed to help senior homeowners bridge gaps in their retirement savings by tapping into the “equity” stored up in their properties. Equity is the value of their homes over the amount owed on existing home loans.
Unlike traditional forward mortgages, borrowers don’t have to make monthly payments under a reverse mortgage, but rather draw cash from the lender either monthly, in a lump sum, as a line of credit or by some combination of the three. California leads the nation in FHA-insured reverse mortgages issued from 2009-16, HUD reported, followed by Florida, New York and Texas.
Loans issued under the 30-year-old program mushroomed in the mid-2000’s because reverse mortgages traditionally were easier to qualify for than traditional forward mortgages. The FHA has been reacting to a series of losses under the program.
In November, HUD reported the economic value of its reverse mortgage insurance fund fell to a negative $7.7 million in fiscal year 2016, down from a positive value of $6.8 billion a year earlier. The agency reported also that just over 89,000 of the 642,000 existing FHA-insured reverse mortgage borrowers were a year or more behind on property tax or insurance payments. HUD determined just over 18 percent of FHA-insured reverse mortgage borrowers were at risk of losing their homes as of November.
A number of reforms implemented over the past several years sought to tighten reverse mortgages. Among them are requirements that borrowers get counseling from financial planners before taking out a reverse loan, and that lenders verify borrowers’ ability to pay property charges such as taxes, maintenance and insurance. Failure to pay those charges are a leading cause of foreclosure since taxes and insurances typically are included in forward mortgage home payments but not reverse mortgages.
The National Reverse Mortgage Lenders Association offered support for the regulation updates, but it cautioned the new limits on lending and the fee increase could be improved.
“We believe that there are alternative options for better managing the HECM program to reduce its overall costs and will continue to advocate for such beneficial changes to the program,” an NRMLA statement read.
The reforms announced Tuesday will have no effect on existing reverse mortgage borrowers.
Among the reforms designed to offset future losses, HUD proposed:
Up-front mortgage insurance fees for most reverse mortgage borrowers will go up, while monthly FHA mortgage insurance payments will go down. Currently, new borrowers receiving so-called “lower draws” must pay 0.5 percent of their loan amount in an up-front insurance payment at the time the loan is issued, while those receiving “higher draws” must pay 2 1/2 percent up front. Effective Oct. 2, all borrowers will pay a standard 2 percent up-front insurance fee, raising reverse mortgage fees for some borrowers. Those changes will affect most new borrowers, the Wall Street Journal reported.
The annual mortgage insurance premium, or MIP, will be lowered to 0.5 percent from 1.25 percent to provide “fee relief” to borrowers and slow the rate at which the loan balance grows, HUD said.
Starting Oct. 2, new limits will be imposed, lowering the amount of cash borrowers can draw from the equity of their home. The average borrower will be able to draw about 58 percent of the value of their home’s equity, down from 64 percent, with limits varying by the borrower’s age and the loan’s interest rate, the Journal said.
Effective Sept. 19, previously announced reforms designed to decrease reverse mortgage defaults will begin. Those reforms include requiring a financial assessment of future borrowers to make sure they will have to means to pay charges on their home such as property taxes, homeowners insurance, homeowners association dues and maintenance costs.
Reverse mortgage losses are making it increasingly challenging for FHA to maintain insurance reserves that Congress requires, HUD stated Tuesday.
HUD blamed reverse mortgage losses for Congress’ first-ever $1.7 billion appropriation in 2013 to shore up losses to the FHA mortgage insurance fund.
“If FHA does not act, the (reverse mortgage) program would require an appropriation from Congress for FHA to endorse new reverse mortgages in FY 2018,” HUD said.
The statement added: “We can no longer tolerate putting American taxpayers and future generations of seniors at risk.”
Homebuying in Huntington Beach in 2017’s first half could not keep pace with countywide sales activity.
Using CoreLogic data, we compared sales patterns from the six months ended in June vs. the first half of 2016.
Sales in Huntington Beach fell as 1,038 residences sold through June vs. 1,055 in 2016. That’s a loss of 1.6 percent vs. a 2.2 percent gain countywide.
Neighborhood trends in Huntington Beach from the CoreLogic report:
Huntington Beach ZIP code 92646 — 346 homes sold in the period vs. 341 a year ago. That’s a sales gain of 1.5 percent. Median selling price of $653,500 vs. $680,000 a year ago, a loss of 3.9 percent.
Huntington Beach ZIP 92647 — 193 homes sold vs. 200 a year ago. That’s a sales loss of -3.5 percent. Median of $680,750 vs. $651,000 a year ago, a gain of 4.6 percent.
Huntington Beach ZIP 92648 — 280 homes sold vs. 271 a year ago. That’s a sales gain of 3.3 percent. Median of $900,000 vs. $880,000 a year ago, a gain of 2.3 percent.
Huntington Beach ZIP 92649 — 219 homes sold vs. 243 a year ago. That’s a sales loss of -9.9 percent. Median of $755,000 vs. $730,000 a year ago, a gain of 3.4 percent.
Here are six countywide trends to ponder, first half 2017 vs. first half 2016 …
1. Prices rose in 70 of 83 Orange County ZIPs. Sales rose in 50 of the 83.
2. In the 27 least expensive ZIPs — median price at $597,500 and below -– 5,258 homes sold. That’s up 0.8 percent.
3. In the 27 priciest ZIPs — median price of $755,000-plus -– 6,431 homes sold. That’s up 5.7 percent.
4. In nine ZIPs with medians above $1 million, sales totaled 1,256 homes, up 7.8 percent.
5. In 16 beach-close ZIPs, 3,158 homes sold, up 3.27 percent.
6. There were 10 ZIPs with median prices under $500,000 with total sales of 1,799 homes. A year ago, 18 ZIPs had medians under $500,000 with 2,793 sales.
DID YOU SEE? It’s been 10 years since Orange County’s housing bubble … or … Half of us rent: L.A.-Orange County homeownership rate 2nd lowest in U.S.
Three senior executives at a New York mortgage lender were arrested Tuesday morning and charged with misappropriating $9 million from warehouse lines of credit meant to be used to fund mortgages. The three men, who are senior executives at Vanguard Funding, stand charged with conspiracy to commit wire and bank fraud for allegedly misusing the warehouse funds to pay for personal expenses and compensation.
By Jonathan Lansner Southern California has 782,000 of its poorest renters living in “worst-case” situations, slightly more than half of what the federal government considers very low-income tenants.
Every two years, the U.S. Department of Housing and Urban Development tallies the number of highly stressed renting household across the nation. The latest report, compiled from 2015 data, is the first to detail trends in 20 large metropolitan areas.
Nationally, 8.3 million poor households were in what HUD defines “worst-case” housing situations in 2015, up 600,000 from 2013 but still 180,000 below the peak of 2011. These are poor renters earning less than half of the regional median income; lacking government housing assistance; pay half their incomes or more to landlords or live in severely substandard conditions — or both.
Southern California’s high rents are taking an especially harsh toll on its poorest households.
In Los Angeles and Orange counties, 1.04 million renter households were considered very low income in 2015 with 567,000 in “worst case” scenarios, or 54.5 percent — fourth highest among the 20 metro areas tracked.
Riverside and San Bernardino counties had 215,000 very low-income renter households with 123,000 in the worst case designation, or 57.2 percent, placing the Inland Empire at No. 2 nationally.
Miami was tops for the share of “worst-case” poor renters at 61 percent and Phoenix was No. 3 at 55 percent. Among the 20 large markets tracked, 47 percent of the total poorest renters were in worst-case conditions.
The San Francisco Federal Reserve President explained the Federal Open Markets Committee is halfway there when it comes to raising rates. He explained the end goal for interest rates is around the 2.5% range. …read more
Tapia, a 2016 HousingWire Woman of Influence, will serve as senior vice president of foreclosure operations for ServiceLink and oversee the management of all foreclosure auction services for ServiceLink. …read more
Anthony Hsieh is the founder and CEO of one of the most prominent nonbanks in the industry, loanDepot. For a CEO of a company that has funded more than $100 billion in loans since its inception, he regularly opens up a seat at the table for others to listen in on what it’s like to be at the helm of one of the biggest mortgage companies. Anyone who follows Hsieh one LinkedIn is privy to this. This latest post, in particular, caught a lot of attention. …read more
The exact intricacies of a credit score continue to be one of the most confusing financial concepts for Millennials. This elusive three-digital number holds the power to some of the most financially expensive purchases in a consumers life, and yet according to a recent poll from LendEDU, young American consumers only have an intermediate understanding of that all-important number. See how well you perform against the stats. …read more