You don't need to pick up the paper anymore or read the news to know that traditional forward mortgages are dramatically changed.
Those taking the biggest hit, other that big backers of mortgage backed securities, have been mortgage companies offering traditional mortgages. Some of these folks are unrecognizable and other are simple out of business.
Up until now reverse mortgages haven't experienced any real hit because of all the hoopla.
Its pretty easy to see why. The reverse mortgage is structurally a very appealing investment to those who may want to invest in mortgages.
The biggest being the reverse mortgage does not require monthly repayment which essentially eliminates risk of default for these loans.
Where we are seeing trouble, however, is in the fact that some companies who lend reverse mortgage money also lend traditional mortgage money out of the same warehouse line.
There is no clear delineation between one source of money and another. As such the money comes from the same spot.
So, what happens if the entire warehouse line is restricted based upon events in the forward mortgage market?
Of course the money made of available for the reverse mortgage gets severely limited. This is currently happening.
This stinks for the institution offering the reverse mortgage but it is just as bad for the poor soul currently looking to close his reverse mortgage. Hes being told to hang in there while his file is transferred to another lender.
How Joe Blow gets hurt in all of this is by getting hit, because the closing takes an additional two or three weeks, by higher interest rates thereby reducing how much he cashes out of his mortgage.
Time is of the essence for reverse mortgages more so than under normal market conditions. Increasing lender margins effectively limit borrowing power if the loan doesn't close before the rate increase.
This can have the net effect of hugely damaging plans to pay of a large medical bill or mortgage currently eating away what little income some of these folks have.
Getting a reverse mortgage thus far has been a piece of cake. This new arrival has made things a little bumpy.
Those taking the biggest hit, other that big backers of mortgage backed securities, have been mortgage companies offering traditional mortgages. Some of these folks are unrecognizable and other are simple out of business.
Up until now reverse mortgages haven't experienced any real hit because of all the hoopla.
Its pretty easy to see why. The reverse mortgage is structurally a very appealing investment to those who may want to invest in mortgages.
The biggest being the reverse mortgage does not require monthly repayment which essentially eliminates risk of default for these loans.
Where we are seeing trouble, however, is in the fact that some companies who lend reverse mortgage money also lend traditional mortgage money out of the same warehouse line.
There is no clear delineation between one source of money and another. As such the money comes from the same spot.
So, what happens if the entire warehouse line is restricted based upon events in the forward mortgage market?
Of course the money made of available for the reverse mortgage gets severely limited. This is currently happening.
This stinks for the institution offering the reverse mortgage but it is just as bad for the poor soul currently looking to close his reverse mortgage. Hes being told to hang in there while his file is transferred to another lender.
How Joe Blow gets hurt in all of this is by getting hit, because the closing takes an additional two or three weeks, by higher interest rates thereby reducing how much he cashes out of his mortgage.
Time is of the essence for reverse mortgages more so than under normal market conditions. Increasing lender margins effectively limit borrowing power if the loan doesn't close before the rate increase.
This can have the net effect of hugely damaging plans to pay of a large medical bill or mortgage currently eating away what little income some of these folks have.
Getting a reverse mortgage thus far has been a piece of cake. This new arrival has made things a little bumpy.
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Find the seven most misunderstood assumptions regarding the California Reverse mortgage here. Also, the nineteen most popular California reverse mortgage questions answered at this website.
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