CHICAGO–John Weicher looked like an accountant who couldn’t believe his own numbers.
Weicher, the Department of Housing and Urban Development’s assistant secretary for housing who oversees all Federal Housing Administration programs in his role as federal housing commissioner, told the 400 lenders gathered for the recent National Reverse Mortgage Lenders Association’s annual meeting that the number of federally insured reverse mortgage loans had doubled 2003’s volume, surprising his department and prompting the need to add new personnel to handle the flow.
“When you close more than 36,000 of these loans in one year in excess of $6 billion, you stop considering it a little something on the side,” Weicher said.
The numbers on Weicher’s bar graph showed only significant leaps, leading the FHA commissioner to state he would have to “create a whole new slide for 2005 if this volume of business continues.”
HUD, through FHA, backs the most popular reverse program known as the Home Equity Conversion Mortgage, which accounts for approximately 90 percent of all reverse loans in the U.S. The agency had insured a previous record 18,097 HECMs during fiscal 2003. The federal fiscal year ends Sept. 30.
Reverse mortgage representatives from around the country agreed with Weicher that phenomenal growth of the industry could be attributed to consistently low interest rates, effective marketing, the aging population and strength of the housing market. Other new borrower data included:
- Average age of a reverse mortgage borrower shifted slightly from 76 in 2000 to 74 in 2004
- Gender shift of 57 percent females in 1990 to 48 percent females in 2004
- Percentage of couples increased from 30 percent in 1990 to 36 percent in 2004
- Average property value increased from $142,000 to $214,000 today
Reverse borrowers make no monthly payments on a their mortgage during its term. The loan comes due when the borrower permanently moves out of his or her home. However, seniors can “outlive” the value of their home without being forced to move. The homeowner cannot be displaced and forced to sell the home to pay off the mortgage, even if the principal balance grows to exceed the value of the property. If the value of the house exceeds what is owed at the time of homeowner’s death, the rest goes to the estate. (For more information, visit www.reversemortgage.org.)
To qualify, consumers must be at least 62 years of age and own their own home. The home does not have to be paid off entirely but the greater the equity, the greater the reverse loan amount. Age, location and loan type also factor in the reverse mortgage amount.
Sarah Hulbert, vice president and national director for Seattle Mortgage and the conference’s co-chair, said NRMLA members were actively pushing for a single national loan limit. HUD’s current guidelines tie loan limits to median home prices in specific counties. Typically, major metropolitan areas have higher loan ceilings than rural areas, regardless of the value of the home. A “jumbo” reverse mortgage, offered by Irvine, Calif.-base Financial Freedom Funding, does not have the geographical restriction.
Weicher has served HUD four times under four different presidents. His is a “political” position. He will depart if the Democrats prevail in November yet could simply choose to retire even if the Bush administration remains. The past year, he worked with reverse lenders to establish an interest rate lock, allowing consumers to choose the best rate for them at the time of application or at closing. He also successfully steered a new rule that reduces the amount of mortgage insurance paid on a reverse mortgage refinance.
And, he’s had his share of public relations problems. Three years ago, his appointment to his current job was questioned by real estate salespersons who felt another person might be “friendlier” to the housing community.
From 1989 to 1993, Weicher was assistant secretary for policy development and research for HUD Secretary Jack Kemp in the first Bush Administration. Weicher was HUD’s chief economist from 1975 to 1977 under Secretary Carla Hills in President Gerald Ford’s administration and spent one year (1973-1974) as a HUD division director in the Nixon Administration.
Reverse mortgages have been around almost as long. An expensive, awkward idea first tried 30 years ago by independent bankers, reverse mortgages have evolved into a “demonstration program” sponsored by HUD in 1993 and now to a permanent, refined economic vehicle that enables seniors to pull tax-free cash out of their home equity.
Tom Kelly’s new book “How a Second Home Can Be Your Best Investment” (McGraw-Hill, $16.95) was co-written with John Tuccillo, former chief economist for the National Association of Realtors and is now available in local bookstores. He can be reached at email@example.com.
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