Why Your Reverse Mortgage May Have Been Transferred in Process
Do I even need to bring up the fact that we are still in a mortgage crisis? I think its pretty part of the landscape and the papers assume people don't want to hear about it until its over.
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.
Thus far reverse mortgages have been fairly insulated from this whole fiasco.
Relative to the traditional mortgage counterpart the reverse mortgage has some very appealing traits for investors in mortgages.
One of the most important differences between the reverse and the traditional mortgage is the HECM does not require periodic interest payments. This dramatically reduces risk.
The problem is that some companies offering reverse mortgages also sell traditional loans and have lines of credit known as warehouse lines available to fund these loans.
There is no clear delineation between one source of money and another. As such the money comes from the same spot.
Since we are seeing so much trouble in the forward mortgage arena it goes to follow that these warehouse lines might be affected negatively. What happens if the line gets temporarily or permanently shut off?
That's right. The money available for reverse mortgages is thereby restricted. This is happening right now.
The lousy part of this is for the people currently in escrow planning on closing on their reverse mortgage. They are being told to hold on while the broker transfers the loan to a new lending institution.
The consumer can take a hit in that it is taking much longer to close a loan being transferred to another lender. We are in an increasing interest rate environment contrary to what you're reading elsewhere. When rates go up mid stream the consumer can realize less money.
Unlike forward mortgages where one can lock in an interest rate for extended periods, reverse mortgage don't have that. Therefore rate increases can severely limit borrowing power.
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.
Word to the wise when getting a reverse mortgage, plan on a few bumps in the road and don't assume anything.
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.
Thus far reverse mortgages have been fairly insulated from this whole fiasco.
Relative to the traditional mortgage counterpart the reverse mortgage has some very appealing traits for investors in mortgages.
One of the most important differences between the reverse and the traditional mortgage is the HECM does not require periodic interest payments. This dramatically reduces risk.
The problem is that some companies offering reverse mortgages also sell traditional loans and have lines of credit known as warehouse lines available to fund these loans.
There is no clear delineation between one source of money and another. As such the money comes from the same spot.
Since we are seeing so much trouble in the forward mortgage arena it goes to follow that these warehouse lines might be affected negatively. What happens if the line gets temporarily or permanently shut off?
That's right. The money available for reverse mortgages is thereby restricted. This is happening right now.
The lousy part of this is for the people currently in escrow planning on closing on their reverse mortgage. They are being told to hold on while the broker transfers the loan to a new lending institution.
The consumer can take a hit in that it is taking much longer to close a loan being transferred to another lender. We are in an increasing interest rate environment contrary to what you're reading elsewhere. When rates go up mid stream the consumer can realize less money.
Unlike forward mortgages where one can lock in an interest rate for extended periods, reverse mortgage don't have that. Therefore rate increases can severely limit borrowing power.
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.
Word to the wise when getting a reverse mortgage, plan on a few bumps in the road and don't assume anything.
About the Author:
Find the five giant mistakes you can make when getting a California Reverse mortgage here. Also, the 20 most asked California reverse mortgage questions found here.
posted by Debt Consolidation Loan at
2:36 PM
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