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Reverse Mortgage Delinquencies Surge

housingwire.comMay 7, 2013

By Megan Hopkins

Monday Morning Cup of Coffee is a quick look at the news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.

A test prototype of the single-securitization platform for the secondary mortgage market is expected as early as next year, regulators said while speaking at the Mortgage Bankers Association's Secondary Market Conference on Sunday.

This goal set forth by the Federal Housing Finance Agency and the government-sponsored enterprises is to incorporate mortgage participants’ feedback into the prototype development, which will hopefully result into a platform creation that suits the industry's needs, explained Tim Yanoti, senior vice president of securitization at Fannie Mae.

Of the almost 600,000 reverse mortgages outstanding, 9.8% are currently delinquent. This is an 8% increase from 2011, according to the U.S. Department of Housing and Urban Development.

The Wall Street Journal writes that delinquencies have increased in recent years as up to 70% of borrowers have opted for lump-sum payouts.

As concerns about defaults rise, the Federal Housing Agency recently discontinued a popular variety of fixed-rate reverse mortgages that paid the highest lump sums available through the program.

If Congress gives the agency the authority, writes WSJ, it plans to require lenders to perform some underwriting, set aside some loan proceeds to cover future property taxes and homeowners insurance, and cap lump sums at the amount needed to pay off specific obligations, including a mortgage outstanding.

After seizing nearly $150 million in New Jersey’s affordable housing money, the Christie administration is keeping quiet despite local officials and fair-share housing advocates growing angry, reports The Star-Ledger.

Designed to help municipalities meet their legal obligation to create homes for those with low and moderate incomes without burdening taxpayers, the state’s Affordable Housing Trust Fund was built up through development fees.

However, the Council on Affordable Housing approved seizing the remaining funds last week and its staff started to send letters to municipal officials. It is unknown where the money will go.

The first quarter results from American Capital Agency provide a short-term idea of what could go wrong in the mortgage REIT sector if mortgage-back security rates and prices change rapidly, writes Seeking Alpha.

American Capital Agency reported that the company's book value per share had declined to $28.93 at the end of the first quarter, off 8.6% from the year-end value and down 11% from the book value peak of $32.49 at the end of Q3 2012.

The company said on an earnings conference call that falling MBS prices when the financial world feared an early end to the Fed’s QE3 bond-buying program caused the book value drop.

The Federal Deposit Insurance Corp. did not close any banks this weekend.

Back to May 2013 Archive

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