Big Pricing Change for Reverse Mortgage
The reverse mortgage industry is currently going through a big change. The powers that be (Fannie Mae) has changed the manner in which we, as reverse mortgage companies, price the loans to our customers.
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.
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.
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.
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 interest rate affects the amount of money a lender will lend in the opposite way of its movement. If rates are up, the loan is less. If rates are down, the loan is more.
Where our group of customers may be in trouble is they will call in for a quote. Rates will be good that day and the lender will verbally green light the transaction.
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.
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.
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.
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.
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 interest rate affects the amount of money a lender will lend in the opposite way of its movement. If rates are up, the loan is less. If rates are down, the loan is more.
Where our group of customers may be in trouble is they will call in for a quote. Rates will be good that day and the lender will verbally green light the transaction.
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.
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 Debt Consolidation Loan at
9:58 PM
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