{"id":9405,"date":"2009-08-01T12:57:47","date_gmt":"2009-08-01T19:57:47","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=9405"},"modified":"2009-08-01T12:57:47","modified_gmt":"2009-08-01T19:57:47","slug":"reversing-a-trend-or-back-to-the-future","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/9405\/reversing-a-trend-or-back-to-the-future\/","title":{"rendered":"Reversing a Trend Or Back To The Future?"},"content":{"rendered":"

If you’re considering a reverse mortgage, get it now.<\/strong> The reverse mortgage market is going to blow up as big as the sub-prime market did.\u00a0 This time, like last, it’s those “durned borrowers” acting differently than the rockets scientists predicted they would.\u00a0 In the sub-prime market, it was assumed that people would honor the old paradigm:\u00a0 mortgage payment, car payment, then consumer credit.\u00a0 Sub-prime borrowers sacrificed the house payment, in order to keep their credit cards active, and the world turned upside-down.<\/p>\n

The reverse mortgage borrower is about to screw things up royally; he’s going to live longer than expected….and like sub-prime, that risk is not priced into the current market<\/a>. <\/strong><\/p>\n

A reverse mortgage is basically a negative amortization, no-payment required loan.\u00a0 Actuaries consider the borrower’s life expectancy,\u00a0 discount a reasonable return on the future loan balance, and loan the borrower whatever is remaining.\u00a0 When the borrower dies, the loan balance can be paid off so that the heirs can “reclaim” the asset or the house is sold.\u00a0 The deal goes sour when the now 65-year old lives past his expected death date. \u00a0 Consider that baby-boomers are the healthiest (and largest)\u00a0 generation; they could add 4-5 years to that life expectancy.<\/p>\n

The loans are still being underwritten as if the oldest baby-boomers were just 56 years old.\u00a0 Throw in the fact that a tremendous amount of home equity evaporated, since, 2007, and you have a recipe for disaster.<\/a> While you remember the wreckage an uptick in defaults had, on a levered sub-prime secondary market<\/a>, imagine how those measly four years could cause the Great Recession of 2030, complete with bailouts.<\/p>\n

The warehouse lenders know it, too.<\/a> Ask reverse mortgage originators why a seemingly healthy market turned ill this year and you’ll hear them blame the liquidity crisis.\u00a0 Reverse mortgage originators will cry that the sub-prime collapse caused warehouse lenders to adopt a bunker mentality, which is killing a healthy mortgage product.\u00a0 They’ll tell you that their product has NOTHING to do with sub-prime and they’re correct.\u00a0 Reverse mortgages and sub-prime loans have only one thing in common;<\/p>\n

they were both priced on faulty risk Read more<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

If you’re considering a reverse mortgage, get it now. The reverse mortgage market is going to blow up as big as the sub-prime market did.\u00a0 This time, like last, it’s those “durned borrowers” acting differently than the rockets scientists predicted they would.\u00a0 In the sub-prime market, it was assumed that people would honor the old […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[26],"tags":[],"class_list":{"0":"post-9405","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-lending","8":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":852,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/852\/what-isaac-newton-knew-about-mortgage-lending\/","url_meta":{"origin":9405,"position":0},"title":"What Isaac Newton Knew About Mortgage Lending","author":"Dan Green","date":"January 4, 2007","format":false,"excerpt":"I recently wrote about sub-prime loans for the first time in a long while because the sector should start taking more headlines in the papers. I'd hate for you to be unready for it, of course. Sub-prime loans are a big part of mortgage lending. \"Sub-prime\" is a broad-sweeping term\u2026","rel":"","context":"In "Enduring Interest"","block_context":{"text":"Enduring Interest","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/enduring-interest\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2251,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2251\/california-sub-prime-bailout-rewarding-the-feckless\/","url_meta":{"origin":9405,"position":1},"title":"California Sub-Prime Bailout: Rewarding the Feckless","author":"Brian Brady","date":"November 23, 2007","format":false,"excerpt":"Governor Schwarzenneger brokered a bailout for California sub-prime borrowers with four major servicers: Countrywide, GMAC, Litton and HomeEq - which collectively service more than one quarter of subprime loans to people with poor credit - agreed to maintain the initial, lower interest rate for some subprime borrowers whose rates are\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":4789,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4789\/deregulation-is-the-new-regulation\/","url_meta":{"origin":9405,"position":2},"title":"Deregulation is the New Regulation","author":"Brian Brady","date":"October 2, 2008","format":false,"excerpt":"From the Wayback Vault in The New York Times Building: Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2355,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2355\/were-all-sub-prime-borrowers-who-consume-oil\/","url_meta":{"origin":9405,"position":3},"title":"We’re All Sub-Prime Borrowers (Who Consume Oil)","author":"Brian Brady","date":"December 12, 2007","format":false,"excerpt":"Residential lending is in a pretty tough spot. Mounting losses, from former white-picket fence owners, are putting a dent in the country club sets' wallets. The problem is not unlike the one we faced 20 years ago; bankers turned into riverboat gamblers. That's all changed. Today, sobriety is the buzzword\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":18716,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/18716\/why-wont-people-move\/","url_meta":{"origin":9405,"position":4},"title":"Why won’t people move?","author":"Brian Brady","date":"June 8, 2022","format":false,"excerpt":"The housing market is \"stuck\". Higher mortgage rates and the fear of higher property taxes cause Boomers and Millennials to \"hunker down\" rather than move to new homes. Reverse mortgages might offer a solution to this problem. Today,\u00a0 2 out of 3 Baby Boomers are rejecting retirement communities and \"aging\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1828,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1828\/sub-prime-borrowers-got-lucky-they-didnt-pay-enough\/","url_meta":{"origin":9405,"position":5},"title":"Sub-Prime Borrowers Got Lucky- They Didn’t Pay Enough","author":"Brian Brady","date":"August 20, 2007","format":false,"excerpt":"I floated an idea about a federal bailout, along the lines of Chrysler in 1980, of Countrywide Financial Corporation. I wanted to highlight two things in this post: Countrywide is in trouble and their trouble is our trouble. My premise is that the collapse of CFC goes beyond the 55,000\u2026","rel":"","context":"In "Group Therapy"","block_context":{"text":"Group Therapy","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/group-therapy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/9405","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=9405"}],"version-history":[{"count":13,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/9405\/revisions"}],"predecessor-version":[{"id":9422,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/9405\/revisions\/9422"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=9405"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=9405"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=9405"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}