My Way Lending

But costs, scams mean seniors still need to be on guard 

Question: My aunt is in a similar position as the 91-year-old woman with an oceanfront house in Southern California. It was suggested to us that she use a reverse mortgage. What are the cons to a reverse mortgage?

Answer: There are a couple that come to mind. For one thing, the fees are expensive, not just to originate the loan but also to administer it. But they are coming down as competition among lenders heats up.

For another thing, a few scam artists seem to have found the sector and are pushing inappropriate loans on unsuspecting borrowers. But that, too, shall pass as the businesses’ standard bearers work to weed out the rascals who foisted so many subprime loans on the masses.

Still, with some 40 million Americans already 62 years of age or older, and with 79 million Baby Boomers heading into the senior years, the potential for reverse mortgages is bright. “This is a vastly underserved market,” says Bart Johnson, co-chair of the National Reverse Mortgage Lenders Association. “The unmet needs are huge.”

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Post from: Reverse Mortgage Loan Blog

Reverse mortgages getting better

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Subprime loan delinquencies have stabilized after their torrid run-up in late payments according to the latest remittance reports. This is obviously a positive sign for the housing market as fewer 60-day delinquencies mean fewer eventual 90-day delinquencies and NOD’s. While analysts caution against over-reaching in the importance of the improvement they do note that it is significant.

Unfortunately, the metrics for foreclosures, REO properties and vacancies were all higher - which may negate any improvement in the delinquency number. Further, a full 33% of all tranches of the 80 deals tracked on the ABX index are rated ‘CCC’ which mean they are in imminent danger of default.

Compounding the problem is that subprime is just a small chunk of the market that is going to see delinquencies and NOD’s as we move through 2008-11. A majority of the loans that will be hardest hit are the limited-documentation, I/O, and Neg Am option ARMs that make up the Alt-A bucket of lending.

From the Reuters article on the slowing subprime loan delinquencies:

The performance of subprime mortgage loans pooled into U.S asset-backed securities showed signs of stabilizing in April, although analysts signal caution ahead.

Remittance reports, which provide a snapshot of subprime loan performance over the last 30 days, showed the pace of delinquencies slowed from the sharp climb in previous months, snapping a long period of pronounced deterioration.

“The deceleration is partly attributable to seasonality (tax refunds), but is nevertheless a fairly significant slowdown,” said Chris Flanagan, analyst at JPMorgan Securities.

…

“Given the historical seasonal pattern of significant percentage change improvements in 30- and 60-day delinquencies in April, we believe the latest report portends additional collateral performance deterioration over the next several months,” the firm said.

Cumulative losses on the risky home loans that support the series of ABX indexes continue to rise.

“This translates to 33 percent of all outstanding bonds across ABX reference entities are in imminent default. Even bonds originally in the ‘AA’ category have fallen to ‘CCC’ or lower,” said Flanagan.