Things just got more interesting in the reverse mortgage industry. Fannie Mae, the company which securitizes reverse mortgages on the secondary market, has changed how we price our loans.
Formerly I could give a customer hard numbers immediately. In other words I could tell them which interest rate and how much money they qualify to receive right off the bat.
Additionally, my numbers would be locked in for up to one hundred twenty 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.
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.
Their goal is to eliminate the burden of that payment.
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.
The amount of money a borrower receives is inversely associated with the interest rate. For instance, when rates are low, the borrower gets more money. Conversely when they go up, the borrower gets less.
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.
The borrower has the choice now of paying the difference between what the reverse mortgage company will lend, now much less than before, and his forward mortgage in cash.
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.
Formerly I could give a customer hard numbers immediately. In other words I could tell them which interest rate and how much money they qualify to receive right off the bat.
Additionally, my numbers would be locked in for up to one hundred twenty 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.
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.
Their goal is to eliminate the burden of that payment.
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.
The amount of money a borrower receives is inversely associated with the interest rate. For instance, when rates are low, the borrower gets more money. Conversely when they go up, the borrower gets less.
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.
The borrower has the choice now of paying the difference between what the reverse mortgage company will lend, now much less than before, and his forward mortgage in cash.
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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