Reversals
The reverse mortgage company Financial Freedom Senior Funding Corp. says the interest rates on a
Jim Mahoney, the chairman of the IndyMac Bancorp Inc. unit, said Tuesday that the interest on its Home Equity Conversion Mortgage Advantage is "a few basis points over 100."
Mr. Mahoney said in February that he would
Financial Freedom rivals BNY Mortgage Co., Seattle Financial Group's Seattle Mortgage, and Wells Fargo & Co. have all said since January that
Mr. Mahoney called the Advantage mortgage a "refinement product" that gives borrowers more cash and potential to build credit with margins 50 basis points higher than the industry standard of 1%. The interest rates are slightly higher than his rivals', he acknowledged, but he said they are more than offset by the lower overall costs and opportunities for credit growth.
He said his company is also developing reverse mortgage products for baby boomers who may be planning to consolidate their retirement income over the next 10 years.
Financial Freedom is considering products with "a combination of reverse and traditional mortgage features" that are tailored to consumers preparing for retirement or already in semi-retirement, Mr. Mahoney said.
Financial Freedom, of Irvine, Calif., generates more than half of the reverse mortgage market's volume in the United States, and Mr. Mahoney said he believes the sector could still expand dramatically over the next several years.
Fueling the growth opportunities are baby boomers nearing retirement, and rising default rates in the subprime mortgage market that make relatively low-risk products like reverse mortgages more attractive to investors.
Credit quality is not an issue for reverse mortgage providers, Mr. Mahoney said, because the borrowers, by definition, own their homes and the loans are paid off when people sell their homes or die.
Midwest Moves
Not all mortgage lenders and brokers are feeling the pain equally.
Hunt Gerson, the president and chief executive of Interactive Financial Corp. in Troy, Mich., said he's responded to the mortgage downturn in the Midwest by applying for mortgage licenses in all 50 states and by trying to hire the best brokers who have been laid off by his competitors.
"It's pretty abysmal out there," Mr. Gerson said. Michigan "is a lousy market" because of layoffs in the struggling U.S. auto industry.
Interactive Financial, with 40 branches and 200 employees, has expanded in Georgia, Kentucky, South Carolina, and Tennessee. It has licenses in about 30 states and hopes to be licensed in all 50 by Labor Day. It works with 250 lenders, offering a wide range of products.
"Like every down cycle, there's going to be a lot of companies that go out of business, and I look at that as truly positive," Mr. Gerson said. "We're seeing a tremendous market for independent mortgage companies that have a handful of branches and see the benefits of joining a larger company."
Freddie Fallout?
New Century Financial Corp. said Freddie Mac's
"Freddie's approach appears to be more sweeping," New Century spokeswoman Laura Oberhelman said Tuesday by e-mail. "Investors like Freddie Mac and lenders like New Century must work very closely together to responsibly meet the market's demands for nonprime lending."
Other subprime lenders said Freddie's move would have a minimal impact.
"We don't sell to them," said Rick Howe, a spokesman for Accredited Home Lenders Holding Co.
More Mortgages
Mortgage applications are picking up.
The Mortgage Bankers Association reported Wednesday that
Home purchase applications increased 5.2% week to week, versus a 1.2% increase in refinance applications. The share of mortgage applications for refinance transactions was 43.2%, down from 44.9% the previous week.
A four-week average of overall applications activity fell 0.2%, though a four-week average of refinance activity rose slightly. The share of adjustable-rate mortgage applications fell slightly, to 21.1% from 21.2%.
