The La Jolla, Califonia-based bank reported net income of $1.0 million for the first quarter of 2012, up 33% from $773,000 in the first quarter of 2011.

“The largest factor in the Bank’s asset growth was significantly increased balances in held-for-sale reverse mortgage loans, with more modest increases in almost all other categories of loans held for investment,” the company stated in a press release. 

The company made a quiet entry into reverse mortgages in late 2011 to acquire and hold for sale FHA-insured reverse mortgage loans. 

“Reverse mortgage loans have become an increasingly attractive financial resource for homeowners at least 62 years of age,” the company stated. “After acquiring $15.6 million in such loans in December 2011, the division increased its loan purchases to $53.5 million during the first quarter of 2012. These adjustable rate, government guaranteed loans strengthen the Bank’s asset quality and improve its liquidity position.”

Written by Elizabeth Ecker

The CFPB recently outlined the potential rules regarding loan originator compensation, including a point that could be “problematic” for reverse mortgage originators, as noted in a memo by National Reverse Mortgage Lenders Association legal counsel. NRMLA has asked the CFPB to alter its rule making accordingly.

Nothing is set in stone, the CFPB stressed to attendees of the Mortgage Bankers Association annual wholesale conference this week. But mortgage industry representatives were skeptical, according to the Origination News report:

“These are not final rules,” Ann Thompson, who works in the Office of Nonbank Supervision at the Consumer Financial Protection Bureau, stressed in response to concerns from attendees at the New York Association of Mortgage Brokers’ annual wholesale conference that the proposals could put their businesses at a disadvantage to others. “Your viewpoint is valuable. The bureau is not trying to create an asymmetric market.”

Marc Savitt, president at the National Association of Independent Housing Professionals and an industry veteran with a long history of involvement in regulatory advocacy work, told attendees he shared their concerns and that they should be part of discussions that could shape the rules.

“I have a problem, and I know a lot of you do as well, with the government coming in…and telling you how much I can make, or telling me how I can charge my customers when my competition doesn’t have to follow the same rules that I do,” Savitt said, noting that he was not singling out the CFPB in his comments, but referring more generally to regulation.

Thompson said the rules would apply to all entities the CFPB regulates but noted that some depositories have different regulators. Some of those depository regulators may have similar rules, she said.

Read the original National Mortgage News article.

Written by Elizabeth Ecker

CNBC covers the bases on reverse mortgages from the “new” Saver product to the way financial planners are starting to include reverse mortgages in their “toolboxes.” Talking to several financial planners who have changed their tune on reverse mortgages, CNBC finds that while the loans are not without their cautions, they may be gaining interest from a new population of borrowers. 

CNBC writes: 

“It helps, of course, to know what you are getting into. Reverse mortgages are loans turned upside down. Your monthly payment is deferred to a future date. When you sell the home it all comes due and it is repaid from remaining equity. It is a transaction that resembles shorting a stock more than it mirrors taking out a traditional home mortgage.

…Reverse mortgages in general could have appeal for the growing army of ‘unretired,’ said Andy Schwartz, a wealth manager and owner of Bleakley, Schwartz, Cooney & Finney.

“Things are changing, people are rethinking retirement, and this is one way people might use to get some money while they do that,” he said. “Even people with a lot of wealth are facing short-term income demands they never expected. This is one option for freeing up home equity. And if home values rise, they can still get the increased equity.”

IRA expert and accountant Ed Slott, chief executive of Ed Slott and Company LLC said it’s a better way to raise cash than to raid your IRA. “Those are the hardest funds to replace – they represent a lifetime of savings.” For people who are nearing Social Security milestones it can provide a bridge loan until they reach the qualifying age.

Written by Elizabeth Ecker

Overall, Americans expect to work longer, work in retirement, and they lack communication among family members to address their retirement plans and strategies. 

“The big story is the need to update our thinking about retirement readiness,” said Catherine Collinson, president of Transamerica’s Center for Retirement Studies in a call with press members. “For many, saving enough to retire at 65 is not realistic. Most people have changed their expectation of retirement in planning to work past 65 or continue working after they are retired.” 

The recession has made people less confident overwhelmingly, at 64% of those surveyed. More than 60% agree their nest egg is not sufficient and 43% reported having to retirement strategy (see chart below), in writing or not. 

“Family relationships are a vital support system. However, the survey found that few workers “frequently” discuss planning and saving for retirement with family and close friends,” the study found. “Of note is that 31% of workers in their 20s expect to financially support their parents when they retire. However, only 4 percent of  workers in their 50s and 60s expect to receive support from their children, illustrating the need for family members to have an open dialogue and build a common understanding.

Those who expect to rely on home equity as a their primary retirement income source is very low, the study finds, at around 1% of working adults surveyed. 

Written by Elizabeth Ecker

Highlighting three trends in reverse mortgages to date, RMI reported Tuesday on the state of the industry from several different perspectives.

New products are here to stay, enabling the market to serve different types of reverse mortgage borrowers, RMI writes. Previously, just one, standard product served senior borrowers. Today, the Saver helps borrowers looking to meet financial planning needs and the HECM Purchase allows borrowers to purchase a new home with a reverse mortgage. 

Fixed rate reverse mortgages have comprised 2/3 or more of total volume for more than two years; a change that happened in less than six months, RMI writes.

But another, more recent trend has emerged in the wake of several large lenders having exited the business: a move away from the kitchen table method of originating reverse mortgage loans.

“Where this business was once powered by “kitchen table” salespeople at  Wells Fargo, Bank of America, Metlife and Financial Freedom, we saw 2 of the top 3 lenders in March were independent reverse mortgage lenders exclusively originating through their call centers,” RMI writes. 

Above all, however, RMI notes the decline in volume the industry has experienced in recent months, and is likely to continue to see through the sustained downturn in home prices. 

“This volume decline is not groundbreaking news to anyone since we’ve been reporting on it for years now, but it does highlight the need for everyone to adapt,” RMI says. 

View the full report from Reverse Market Insight.  

Written by Elizabeth Ecker

Looking at prepayment data from every fixed rate HMBS pool issued since 2008, Cantor reported several important findings Tuesday. First, it aimed to find the truth to the claim that there are no fixed standard HMBS pools that have ever paid at either zero or two hundred percent of the prepayment curve consistently over the life of the pool. 

“On the surface, this statement sounds reasonably plausible, yet we still wanted to find out for ourselves,” writes Jeff Traister, Managing Director Mortgage Securities Group for Cantor Fitzgerald. ”Pools that had paid very slowly had factors much greater than one and, inversely, fast pools had factors well below one. To find the most extreme prepay examples, we then filtered for the top ten slowest and fasted pools in our universe. After all the data was crunched, we occasionally found single monthly speeds at zero or two hundred percent of the prepayment curve but there were no instances where those levels were maintained.”

But an unexpected finding emerged from the data, Traister explains. 

“Pools issued before April 2009 exhibited very little speed difference between the slowest and fastest pools,” he writes. “Pools issued after April 2009 exhibited very large speed differences between the slowest and fastest pools.”

What does this mean for investors? 

Cantor presents three conclusions. First, fixed pools have not historically prepaid at either zero or 200% of the HECM prepay curve. 

“A conservative investor should be comfortable using these two highly improbable speed paths for extreme fixed pool scenarios,” Traiser writes. 

Second, low loan count was often a factor in pools that fell either in the slowest or fastest prepayment groups. Borrower age was not a factor. Finally, that home values may have impacted turnover rates, and that pools that have a specific concentration of loans from a particular geographic region may perform differently. 

Written by Elizabeth Ecker

This would allow private reverse mortgages to be securitized and originated without that requirement. 

“We are requesting [the CFPB] create a definition of a qualified mortgage under its [Ability to Repay]-QM rule to assure that reverse mortgages, other than FHA-insured HECMs, have an opportunity to qualify for an exemption from the risk retention requirements,” said Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association, during testimony presented before the House Subcommittee on Insurance, Housing and Community Opportunity.

The CFPB is currently working on a QRM definition—a hotly debated concept among mortgage industry participants.

“Having a specific definition of a “QM” for reverse mortgages will help facilitate the return of a conventional market with proprietary products,” Bell said. “Our recommendation is that reverse mortgages that are either FHA-insured, or meet the guidelines of the FHA HECM program, should be deemed to be a qualified mortgage for purposes of the ATR-QM rule.”

Written by Elizabeth Ecker

Followed and enforced by the Financial Crimes Enforcement Network (FinCEN), mortgage loan fraud is on the rise, and has shown a sharp uptick in the last two years, according to a FinCEN report published this week. 

“Quite markedly, Mortgage Loan Fraud is the only summary characterization that has experienced an increase every year since 1996, with the past two years (2010 and 2011) accounting for nearly 37% of all noted instances of this specific activity for the last decade,” the report states. 

However, FinCEN notes that SARs can be filed well beyond the activity period during which the fraudulent activity may have taken place. The organization says repurchase demands have largely led to the increase. 

“This upward spike in mortgage fraud counts is in predominant part attributable to mortgage repurchase demands and special filings generated by several institutions,” FinCEN states. 

View the report. 

Written by Elizabeth Ecker