New data published by the Department of Housing and Urban Development shows that despite record low interest rates, reverse mortgage prepayments are falling according to a report from New View Advisors.

Hardly in line with conventional mortgage prepayment behavior − which typically rise when interest rates fall because borrowers refinance − the HECM product and borrower provide investors with a unique opportunity.

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After adjourning in August, the reverse mortgage industry is watching closely as the Senate is scheduled to reconvene in Washington this week.

The Senate Appropriations Committee included $150 million for the HECM program in its FY 2011 budget, but Washington insiders say the odds are slim that there will be any movement on the bill before lawmakers head out to the campaign trail for the November midterm elections.

If the Senate fails to pass a budget, Congress will likely be forced to pass at least one “continuing resolution” to prevent a federal shutdown and continue operating at the 2010 budget level.  Where the HECM appropriation goes from there isn’t clear, but with the Senate providing $150 million and the House passing a budget with $140 million of support for the HECM program, the appropriation process had a positive impact on the industry.

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New data from the Mortgage Bankers Association shows independent mortgage bankers and subsidiaries average profit per loan was $917 during the second quarter of 2010, up 51% from the first quarter.

The increase was driven by a rise in the average production volume for each firm to $196.6 million in the second quarter of 2010, compared to $157.8 million in the first quarter of 2010. As a result, production operating expenses decreased to $4,677 per loan in the second quarter of 2010, from $5,147 per loan in the first quarter of 2010.

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Non-profit credit counseling and education agency, CredAbility, released its 2010 Second Quarter Consumer Distress Index report. The Consumer Distress Index tracks financial condition of the average American household and organizes the information using a 100-point scale. Any score below 70 points is considered “a state of financial distress.” This quarter, which ended on June 30, 2010, United States households scored a 65.2 on the index’s scale.

While this score has increased from 65.0 points from last quarter, the second quarter report found high levels of unemployment and that the strain of household costs was keeping consumers in financial distress. This marks the fifth quarter that American consumer’s net worth has increased and can be attributed to consumers finally paying down debit and the stabilization of housing prices in some parts of the country.

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The Department of Housing and Urban Development (HUD) is scheduled to meet with reverse mortgage servicers in Washington on Tuesday to discuss taxes and insurance defaults according to several people briefed on the meeting.

The gathering comes less than two weeks after an audit by the HUD Office of Inspector General found nearly 13,000 HECM loans were in default from failure to pay taxes and insurance.

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To help customers follow the new HECM Counseling protocols, Reverse Vision released CounselingDocs.org to help facilitate the transfer of documents between lenders, borrowers, and counseling agencies.

The new reverse mortgage protocol from the Department of Housing and Urban Development requires that borrowers interested in reverse mortgages receive a large information package that includes individualized loan tables prior to their counseling session.

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Despite the Federal Housing Administration withdrawing the approval of more than 1,100 lenders since January, an investigation by the Washington Post found FHA-approved lenders are employing executives with criminal records.

Through documents and interviews, WaPo reports that more than 34,000 home loans have been issued over the past two years by a dozen FHA-approved lenders that have employed people convicted of felonies, banned from the securities industry or previously worked for firms barred by the agency.

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