Reverse Mortgage Guide

The final figures are in for 2008 and it was a record year for FHA-backed reverse mortgages. That said, program growth was muted and mild, a far cry from the FHA program in general.

The way the government works is that it computes budgets and activities on the basis of “fiscal” years, periods which run from October 1st of one year until September 30th of the next. We now have final figures for fiscal 2008 and the results for FHA reverse mortgages — what HUD calls home equity conversion mortgages or HECMs — look like this:

___ The FHA received 2,008,157 single-family loan applications during the year. That’s up 161.2 percent over the 768,770 applications received in fiscal 2007.

___ In fiscal 2008 the FHA approved 1,199,624 mortgage applications. This number is up 125 percent from fiscal 2007 when the FHA agreed to insure 532,337 mortgages

In contrast, the numbers for FHA reverse mortgages looked like this:

___ HUD received 144,635 HECM loan applications, a figure up 20.2 percent from the 120,304 received in fiscal 2007.

___ HUD endorsed (approved) 112,154 reverse mortgage applications, that’s a record — but up only 4.3% from the 107,558 reverse mortgages originated in fiscal 2007.

What’s striking about these numbers is that the reverse mortgage program actually grew in the middle of the worst mortgage meltdown seen in decades.

But what’s also striking is that the reverse mortgage program showed meager growth compared with FHA loans in general. There’s a huge difference between 4.3 percent growth and 125 percent.

What accounts for the different results?

There’s no poll or survey to explain what happened, but most likely the divergent results are a by-product of several factors.

First, as home values have slid in most markets seniors have watches as equity has disappeared. This has made reverse mortgages less attractive.

Second, much of the year has been spent waiting for FHA reverse mortgage loan limits to rise. Loans with the new limits should be available later in the year when official FHA guidelines are published.

Third, The FHA reform bill was only passed in August. It lowers origination fees — but that may not be the whole story. Some seniors are likely waiting for final guidelines before looking into reverse mortgages. FHA reform, of course, did not lower HUD insurance premiums, an ongoing source of irritation given the few claims made against the program.

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This entry was posted on Tuesday, October 14th, 2008 at 4:00 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.