Fannie Mae and the powers behind her, last week, changed the manner in which us little reverse mortgage companies can price our loans to consumers. This is a big change.
Last week when someone called in for a quote, we would give them some competitive numbers and we could stick by them.
Furthermore, my quote was relatively etched in stone for up to 4 months.
Today we can throw this nice long lock period out. Now this industry is pricing its loans like traditional forward mortgages such that we now have varying short lock periods.
Since most reverse mortgages take longer than the lock periods some customers will get burned. Quite a few senior borrowers are banking on the reverse mortgage to come in and pay off their forward mortgage.
These folks need extra money and eliminating that payment associated with the mortgage is just the ticket.
Where I can see a problem is that interest rates play a major role in how much money a borrower can receive for the reverse mortgage. Too often the reverse mortgage is just enough to pay off the forward mortgage.
How much a lender lends is inversely related to rates. When they go up, the borrower gets less, and vice versa.
Since some buyers are right on the cusp, they will be quoted one day. The lender will say, "good news, looks like you'll be able to pay off your 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 new pricing should offer a better experience for customers such that it should, because of its complexity, sift out some of the weak reverse mortgage loan officers.
The stronger, more knowledgeable LOs will see this as old hat, know how to explain it, and probably garner more of the business.
Last week when someone called in for a quote, we would give them some competitive numbers and we could stick by them.
Furthermore, my quote was relatively etched in stone for up to 4 months.
Today we can throw this nice long lock period out. Now this industry is pricing its loans like traditional forward mortgages such that we now have varying short lock periods.
Since most reverse mortgages take longer than the lock periods some customers will get burned. Quite a few senior borrowers are banking on the reverse mortgage to come in and pay off their forward mortgage.
These folks need extra money and eliminating that payment associated with the mortgage is just the ticket.
Where I can see a problem is that interest rates play a major role in how much money a borrower can receive for the reverse mortgage. Too often the reverse mortgage is just enough to pay off the forward mortgage.
How much a lender lends is inversely related to rates. When they go up, the borrower gets less, and vice versa.
Since some buyers are right on the cusp, they will be quoted one day. The lender will say, "good news, looks like you'll be able to pay off your 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 new pricing should offer a better experience for customers such that it should, because of its complexity, sift out some of the weak reverse mortgage loan officers.
The stronger, more knowledgeable LOs will see this as old hat, know how to explain it, and probably garner more of the business.
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