Fannie Mae and the powers behind her, last week, changed the manner in which us little reverse mortgage companies can price our loans to consumers. This is a big change.
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.
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.
Getting rid of the payment associated with the mortgage is their main goal.
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.
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.
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 not exactly a great pricing change for the average reverse mortgage customer.
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 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.
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.
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.
Getting rid of the payment associated with the mortgage is their main goal.
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.
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.
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 not exactly a great pricing change for the average reverse mortgage customer.
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 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.
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