Sunday , April 21 2019
Home / Money / Payment Shock: What Unnoticed Fallout From The Mortgage Lending Crisis Could Mean For You
Financial crisis reverse mortgage

Payment Shock: What Unnoticed Fallout From The Mortgage Lending Crisis Could Mean For You

Issues with home equity lines of credit may push more to reverse mortgages.

For those considering a reverse mortgage, there’s a lot going on in the industry right now that could affect whether many older Americans consider one or even be able to take one out.

The industry is expecting a boost from the fallout of the mortgage lending crisis over the last decade, offset by some rules changes for obtaining a reverse mortgage.

What’s happening, says Shannon Hicks, president of Reverse Focus Inc., a firm that provides training and tools for reverse mortgage lenders and professionals, is that rising interest rates and home equity lines of credit or HELOCs are nearing their draw period.

“The reset of existing HELOCs and those written about 10 years ago are a ticking time bomb for those who overextended themselves or got into a HELOC not understanding the full impact of it later down the road when they enter the repayment period,” Hicks says.

What’s going to happen is those homeowners will see a payment shock – in some cases doubling, depending on the interest rate on the loan – and in many cases they will have their line of credit frozen. Hicks says.

“This is going to create a one-two punch for these individuals who want access to the liquidity but now are going to be saddled with the burden of a monthly payment for the debt service,” Hicks says. “It’s one of the lingering effects of the mortgage crisis that’s gone unnoticed.”

Some might gain from refinancing their existing home equity line of credit or their first mortgage, but some will find themselves limited if they have too high of a mortgage lien balance between the two to be able to get a reverse mortgage or Home Equity Conversion Mortgage (HECM), he says.

“The opportunity is there, and that opportunity will be mitigated in some sense by the rising interest rates that affect the principal limit on the HECM loan,” Hicks says. “I don’t think we will see a big uptick yet because people are slow to adopt, even in this situation with the home equity line of credit.”

Hicks says he expects advertising will focus on this issue, and banks will be looking for opportunities with reverse mortgages to prevent people from defaulting.

In light of what’s happening in the marketplace, Hicks says a reverse mortgage could be a right fit for many homeowners. If they find themselves hard pressed to make payments and are facing a default on their home equity line of credit, they should consider a HECM, he says.

“That will free up their cash flow,” he says. “It might be their best option if they’re tight on finances each month.”

With a reverse mortgage, homeowners 62 and older receive a loan backed by the equity in their homes. The lender isn’t repaid until the home is sold.

Reverse mortgages bounced back in 2013 in their best showing since the Great Recession in what some analysts say was tied to demographics and improvement in the housing market.

Industry publications reported that borrowers took out 20 percent more loans in 2013 compared to 2012 and reached $15.3 billion. That’s still below the record of $30.2 billion in reverse mortgage loans in 2009.

Hicks says he expects the volume of reverse mortgages to be down this year by about 10 to 15 percent because of new guidelines put in place by the Department of Housing and Urban Development.

Gone are the days of qualification based on age, home value and available equity, Hicks says. Lenders now look at credit history and financial capacity as measures by income and monthly expenses.

“We are stepping into the world of traditional mortgage lending and doing more risk mitigation to prevent people from getting a short term fix that could blow up later on,” Hicks says.

As people understand the rules better, the industry will see an increase in HECMs, Hicks says. The industry has a good future, and Hicks says some lenders are already changing how it’s marketed to focus more on the actual name of HECM rather than reverse mortgage, which has a stigma for some.

“Many individuals that can be helped today outright reject it because of the name,” he says. “But more lenders are switching.”

Check Also

Reverse Mortgage pros

5 Upsides To An HECM Reverse Mortgage

As you near your golden years, the last thing that you want to have to ...


  1. Hey, how’s it going?

    I want to pass along some very important news that everyone needs to hear!

    In December of 2017, Donald Trump made history by recognizing Jerusalem as the captial of Israel. Why is this big news? Because by this the Jewish people of Israel are now able to press forward in bringing about the Third Temple prophesied in the Bible.

    Jewish Rabbis have publicly announced that their Messiah will be revealed in the coming years who will be a leader and spiritual guide to all nations, gathering all religions under the worship of one God. They deny Jesus as their Messiah, and the Bible tells us this Jewish Messiah will be the counterfiet that will bring about a false peace, and ultimatley the great tribulation.

    They even printed a coin to raise money for the Temple with Donald Trumps face on the front and with king Cyrus'(who built the second Temple) behind him. On the back of the coin is an image of the third Temple.

    More importantly, the power that runs the world wants to put a RFID microchip in our body making us total slaves to them. This chip matches perfectly with the Mark of the Beast in the Bible, more specifically in Revelation 13:16-18:

    “He causes all, both small and great, rich and poor, free and slave, to receive a mark on their right hand or on their foreheads, and that no one may buy or sell except one who has the mark or the name of the beast, or the number of his name.

    Here is wisdom. Let him who has understanding calculate the number of the beast, for it is the number of a man: His number is 666.”

    Referring to the last days, this could only be speaking of a cashless society, which we have yet to see, but are heading towards. Otherwise, we could still buy or sell without the mark amongst others if physical money was still currency. This Mark couldn’t be spiritual because the word references two different physical locations. If it was spiritual it would just say in the forehead. RFID microchip implant technology will be the future of a one world cashless society containing digital currency. It will be implanted in the right-hand or the forehead, and we cannot buy or sell without it! We must grow strong in Jesus. AT ALL COSTS, DO NOT TAKE IT!

    “Then a third angel followed them, saying with a loud voice, “If anyone worships the beast and his image, and receives his mark on his forehead or on his hand, he himself shall also drink of the wine of the wrath of God, which is poured out full strength into the cup of His indignation. He shall be tormented with fire and brimstone in the presence of the holy angels and in the presence of the Lamb. And the smoke of their torment ascends forever and ever; and they have no rest day or night, who worship the beast and his image, and whoever receives the mark of his name” (Revelation 14:9-11).

    People have been saying the end is coming for many years, but we needed two key things. One, the Third Temple, and two, the technology for a cashless society to fulfill the prophecy of the Mark of the Beast.

    Visit http://WWW.BIBLEFREEDOM.COM to see proof for these things and much more!

    If you haven’t already, it is time to seek God with all your heart. Jesus loves you more than you could imagine. He wants to have a relationship with you and redeem you from your sins. Turn to Him and repent while there is still hope! God bless!

  2. I am really loving the theme/design of your web site. Do you ever run into any browser compatibility problems? A few of my blog readers have complained about my website not working correctly in Explorer but looks great in Chrome. Do you have any tips to help fix this issue?

  3. I cannot thank you enough for the article.Really looking forward to reading more. Want more.

Leave a Reply

Your email address will not be published. Required fields are marked *