Page 372 - 2019 6th AFIS & ASMMA

» Moderator | Richard K. Green
But do you see evidence that it's been much of a problem?
» Panelist | Min Hwang
No, I mean if every prepayment is about seven years, you don't even
get to the ten-year period. Forward MBS is usually about five to seven
years for the prepayment, so they're pretty similar actually.
» Moderator | Richard K. Green
Oh, Tyler, you want to follow up on that?
» Panelist | Tyler T. Yang
Chairman and CEO, Integrated Financial Engineering, Inc
Yeah, I was doing the actuarial review for the HECM program for the
last several years, and we did one particular analysis looking at regressing
the termination due to the death versus the national mortality rate, and
we found HECM death rate is about 90 percent of the national mortality
rate. So it's kind of indirect evidence that there's some self-selection
happening in that.
» Moderator | Richard K. Green
All right, and I'm going to put up this audience question. I have it on
my screen, there we go. So both the US and South Korean governments
do not directly supply reverse mortgages but through banks. What do
you think about the government's direct supply of reverse mortgages in
Korea, particularly basically at a subsidized interest rate?
» Panelist | Min Hwang
I think I actually know who asked this question. Let me explain the
case of the US first. In the US, the government is actually involved a lot in
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consumer loans; they are involved in the student loans, mortgage loans
and so on, but in any case, I don't think the government ever directly got
involved in the lending process itself. I'm not 100% sure, but as far as I
know, it's very rare that the government becomes a direct lender to any
of those loans. I think part of the reason is it cannot be guaranteed that
the government is going to be an effective lender, in terms of securing the
funds, in terms of underwriting the loans, and evaluate the borrowers.
I mean, it's not the job for the government, right? Governments should
have some policy goals to help certain groups of borrowers, and let the
market help those people, and give the incentive to private market to
provide those opportunities to those borrowers. So I think it's preferable
for the government to help the private market to supply those credits,
instead of directly involved in lending.
Session III
» Moderator | Richard K. Green
Okay, I think we should continue that discussion, because I think it's a
really interesting point. But let's turn it over to Tyler. Probably he has been
more in the weeds on the US HECM program than anybody else in the
whole country. So Tyler Yang, please tell us the issues with reverse mortgages.
» Presenter | Tyler T. Yang
Okay, thank you Richard. Actually my slides will probably answer part
of the second question a little bit. So I'm teaching the real estate finance
capital market course in John Hopkins University now, and the one first
lesson I give my students is that although the US has probably the longest
housing finance system available in the world, it is not flawless. Over the
years, we just learned one thing, which is that there is no perfect solution
that solves all the problems. In the US, for the last eighty years since
the establishment of the FHA, we've seen the US financial system has
evolved several times and wherever there is a crisis, they fix the program
to fix that situation and then life is good for a few years, and then the
next crisis hits. So we see that continuously evolves and even nowadays
there's still no evidence that we have solved all the problems. We just wait
for the next crisis to hit.
2019 6th AFIS & ASMMA Annual Meeting 375