The reverse mortgage industry is currently going through a big change. The powers that be (Fannie Mae) has changed the manner in which we, as reverse mortgage companies, price the loans to our customers.
Last week when someone called in for a quote, we would give them some competitive numbers and we could stick by them.
In fact the quote, if the customer went forward, would be good for 120 days.
The 120 lock period is no longer available. Rather, the new pricing structure has much shorter interest rate lock periods. This likens itself to the forward mortgage market.
This is going to come up and bite some people, i can guarantee you. There exists a certain segment of reverse mortgage customers that are attempting to pay off a forward mortgage.
Getting rid of the payment associated with the mortgage is their main goal.
Here is where they can get in trouble. Often the loan amount, offered by a reverse mortgage lender, is just enough to pay off the mortgage. A big factor determining how much the borrower gets is the interest rate.
How much a lender lends is inversely related to rates. When they go up, the borrower gets less, and vice versa.
For the folks who need as much money as possible, this could be tricky. The interest rates may be favorable when they start the process. It initially looks like they can pay off the mortgage.
Two weeks later, after the market sends the rate up a point or so, when they go to lock they may no longer be able to pay that mortgage off.
Now the borrower is stuck either waiting for rates to come down or is left with the choice of coming in with cash to pay off the mortgage.
This is the down side. The up side for the borrower is it will force lenders to be competitive in their pricing.
The upside for the professional loan officer is it will weed out the fly-by-nighters entering the reverse mortgage business just looking to make a buck.
The reverse mortgage loan officers with knowledge and experience would understand how to properly present this to customers. My guess is they will win more customers. - 15224
Last week when someone called in for a quote, we would give them some competitive numbers and we could stick by them.
In fact the quote, if the customer went forward, would be good for 120 days.
The 120 lock period is no longer available. Rather, the new pricing structure has much shorter interest rate lock periods. This likens itself to the forward mortgage market.
This is going to come up and bite some people, i can guarantee you. There exists a certain segment of reverse mortgage customers that are attempting to pay off a forward mortgage.
Getting rid of the payment associated with the mortgage is their main goal.
Here is where they can get in trouble. Often the loan amount, offered by a reverse mortgage lender, is just enough to pay off the mortgage. A big factor determining how much the borrower gets is the interest rate.
How much a lender lends is inversely related to rates. When they go up, the borrower gets less, and vice versa.
For the folks who need as much money as possible, this could be tricky. The interest rates may be favorable when they start the process. It initially looks like they can pay off the mortgage.
Two weeks later, after the market sends the rate up a point or so, when they go to lock they may no longer be able to pay that mortgage off.
Now the borrower is stuck either waiting for rates to come down or is left with the choice of coming in with cash to pay off the mortgage.
This is the down side. The up side for the borrower is it will force lenders to be competitive in their pricing.
The upside for the professional loan officer is it will weed out the fly-by-nighters entering the reverse mortgage business just looking to make a buck.
The reverse mortgage loan officers with knowledge and experience would understand how to properly present this to customers. My guess is they will win more customers. - 15224
