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Friday, January 16, 2009
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.
If someone were to contact me under the former pricing policy, I could instantly quote and be almost 100% sure I could stand by my numbers.
In fact the quote, if the customer went forward, would be good for 120 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.
A high percentage of borrowers are looking to the reverse mortgage as a savior to pay off their current forward mortgage. Some of these folks are in for a rude awakening.
Getting rid of the payment associated with the mortgage is their main goal.
Many times the lender will lend just barely enough to cover the payoff of the mortgage. Remember, part of the equation of how much a lender will lend is based upon interest rates.
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.
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.
Envision this.. Fourteen days later, when the borrower can finally lock in the rate, what if rates are up one percent or so. This borrower will be out of luck in as far as paying off that mortgage.
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.
We can see that a few of these borrowers will absolutely go through this in the coming months and years.
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 strong loan officers will have a handle on how to present this to seniors and will win most of this business. Good for us.
If someone were to contact me under the former pricing policy, I could instantly quote and be almost 100% sure I could stand by my numbers.
In fact the quote, if the customer went forward, would be good for 120 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.
A high percentage of borrowers are looking to the reverse mortgage as a savior to pay off their current forward mortgage. Some of these folks are in for a rude awakening.
Getting rid of the payment associated with the mortgage is their main goal.
Many times the lender will lend just barely enough to cover the payoff of the mortgage. Remember, part of the equation of how much a lender will lend is based upon interest rates.
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.
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.
Envision this.. Fourteen days later, when the borrower can finally lock in the rate, what if rates are up one percent or so. This borrower will be out of luck in as far as paying off that mortgage.
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.
We can see that a few of these borrowers will absolutely go through this in the coming months and years.
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 strong loan officers will have a handle on how to present this to seniors and will win most of this business. Good for us.
posted by Credit Counseling at
12:41 AM
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