Big Pricing Change for Reverse Mortgage
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.
Last week when someone called in for a quote, we would give them some competitive numbers and we could stick by them.
Additionally, my numbers would be locked in for up to one hundred twenty days.
This is no longer the case. Today reverse mortgage feel more like forward mortgages in that interest rate pricing is done with varying lock periods. And pricing can change day to day prior to locking rates.
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.
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.
At this point what are the choices for this customer? He can either wait for interest rates to drop back down or pay the difference 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 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 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.
Additionally, my numbers would be locked in for up to one hundred twenty days.
This is no longer the case. Today reverse mortgage feel more like forward mortgages in that interest rate pricing is done with varying lock periods. And pricing can change day to day prior to locking rates.
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.
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.
At this point what are the choices for this customer? He can either wait for interest rates to drop back down or pay the difference 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 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 stronger, more knowledgeable LOs will see this as old hat, know how to explain it, and probably garner more of the business.
posted by Debt Consolidation Loan at
12:51 AM
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