Ted Tozer became president of the Government National Mortgage Association (GNMA, or “Ginnie Mae”) in early 2010 as the country was embroiled in ongoing recovery efforts sparked by the 2008-09 financial crisis. I took office. He was nominated by President Barack Obama in late 2009 and served a second term, resigning shortly before Donald Trump took office in January 2017.
Prior to the confirmation of incumbent Alana McCargo, Tozer was Ginnie May’s last full-time president as the Trump administration operated away from an interim leader during its term. Since then, Rivers’s mortgage industry has seen a series of ups and downs, but Mr. Tozer recently said in a quote published in a newspaper opinion section by his broker, California Mortgages, that Rivers’ mortgage industry has seen a series of ups and downs. “It is on the brink of collapse,” he said.
To better understand Mr. Tozer’s view of the current state of reverse mortgage programs, RMD sat down with him to talk about it and some of the issues he saw up close while working at Ginnie Mae. .
RMD: You understand the reverse mortgage business through a very specific and detailed lens. How would you rate the current state of the reverse mortgage industry?
Ted Tozer: What I see now is an interesting crossroads on many different fronts. The cost of servicing and addressing all the issues associated with reducing the FHA, and what you can get in terms of costs and compensation, I believe these issues pose some real challenges to the industry. Also, the overall origination volume is not very strong in that it has not introduced any very significant new services or new loans. […]
So it seems like there are a lot of challenges in this industry.But the big thing is [the issue of] The math and economics to ensure there are enough funds left on the back end to process the loan, and the balance with the income needed on the front end to be able to research and initiate the loan on the front end is taken. I think that is the big issue. Furthermore, the way the reverse mortgage business gets to a point of sufficient size and the volume that you get from it justifies having enough originators that you can actually have a fair amount of competition among them. I can do it.
RMD: Ginnie Mae In terms of your interactions with the industry during your tenure, what perspectives do you think have shaped both the FHA HECM program and the reverse mortgage industry?
TT: The biggest thing I saw at Ginnie Mae was, for example, when I got to Ginnie Mae, [it] There was no minimum service charge. As such, the originator had stowed all her income so that she could pay her broker for the mortgage. [and themselves] Significant upfront payment.
But at that point, it became kind of like Trump’s house because if the volume didn’t keep coming in the door, you’d be bankrupt because you’d pushed everything forward. That’s why we’ve researched and set a minimum service charge. They force the money to move to the loan backend for servicing purposes in order to try to do a better job of balancing that origination income and future servicing income income.
Everyone Knows When You Get A Forward Mortgage [what the interest rate is]In the HECM program most seniors were unaware of the interest rate. So we saw very high interest rates. This whole frontloading that penalizes seniors is the kind I’ve seen because the interest rates on these loans are literally relatively high compared to forward mortgages. [during my time at Ginnie Mae].
RMD: You recently said that the HECM program was “on the verge of collapse” due to insufficient financing. HECM volumes have hovered between 40,000 and 50,000 loans per year for most of the last 10 fiscal years, with the exception of 2019. did i talk to you before?
TT: We’re talking about backend issues and the fact that the various subservicers are all struggling. What I’ve heard from them is, for example, they need to raise their rates to cover the cost of meeting all his FHA requirements and minimize client cuts. However, those price increases cannot be passed on because there is not enough revenue on the secured revenue side.
So the whole industry has this real problem. Because these old loans are just putting the whole industry in a tight spot on the service side, so they need to get new loans with a big revenue stream. .
I am also worried. Because we don’t even know if they’re setting enough revenue yet. loan. For example, I always tell people on the forward side that most loans are never foreclosed on.
But for reverse mortgages, nearly all loans are foreclosed. As such, the backend cost of a reverse mortgage is significantly higher than the cost of a forward mortgage. But I’m really concerned that I don’t think the reverse mortgage income will be much higher than the forward mortgage income. [is paired with] something else you have to do. Much more expensive than a forward mortgage.
RMD: was announced The FHA’s selection of a new HECM service contractor earlier this year and industry reaction It was very positive. When that’s finalized, do you think the more reverse owner of the service contract might address some of your concerns?
TT: To some extent. […] As for Celink, the people are very nice and very professional. What I was really pushing with Brian Montgomery and the people at the FHA during the Trump administration was that they should allow the current servicer to continue servicing the loan instead of allocating it to a new servicer. . [under] FHA.
This is because the biggest problem I encountered when trying to transfer these services was having to retrieve all my old paperwork from someone who knew when and when the loan started. That was 10 years ago Maybe, but the new servicer needs to have all these files for all the information, so they have to dig through them. Why bother?
If I am currently serving the FHA, I am at 98% of my maximum bill, so why am I unable to purchase a loan from the Jeannie Mae pool and sell the loan to the FHA to keep it? Where do you serve? Why should I transfer my service? It’s very likely that the loan will not be transferable as it will cost a significant amount of money and you will not be able to find any documentation or anything about when the loan was initiated. [sometimes upwards of] 10 years ago.
So that’s why I’m disappointed. When the FHA underwrote the loan, I thought there would be some traction in the concept of having the current servicer continue to service it and selling the loan instead of servicing it.
More information will come from future discussions with Ted Tozer on RMD.