New Rules for Reverse Mortgage Interest Rate Pricing
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.
Formerly I could give a customer hard numbers immediately. In other words I could tell them which interest rate and how much money they qualify to receive right off the bat.
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.
Since most reverse mortgages take longer than the lock periods some customers will get burned. Quite a few senior borrowers are banking on the reverse mortgage to come in and pay off their forward mortgage.
These folks need extra money and eliminating that payment associated with the mortgage is just the ticket.
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 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.
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.
The borrower has the choice now of paying the difference between what the reverse mortgage company will lend, now much less than before, and his forward mortgage in cash.
This is not exactly a great pricing change for the average reverse mortgage customer.
I believe this new pricing model, though negative in my example, should drum out a good number of the poor loan officers in this industry.
The reverse mortgage loan officers with knowledge and experience would understand how to properly present this to customers. My guess is they will win more customers.
You might be in California and want information about the reverse mortgage, scooch on over this this spot. Additionally, go here for the revealing ofthe big mistakes you can make in California procuring a reverse mortgage.
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Tagged With Mortgage, mortgage interest, mortgage rate, mortgage rule, reverse mortgage
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