With the recent increase in reverse mortgage rates and lower premiums from the secondary market, originators are are finding it increasingly difficult to make enough on their loans without charging an origination fee.
In past years, brokers saw back end pricing increase and were able to pass some of that money along to the consumer, by forgoing origination fees. Waived fees were commonplace and became expected by those applying for reverse mortgages. Not anymore.
“We’re making nothing on the back end, so we’re forced to have fees,” says Teague McGrath, vice president of marketing for Orange-Calif.-based American Advisers Group (AAG). “We can’t survive on the [current prices]…we are forced to do something.”
McGrath says origination fees are already being reintroduced throughout the industry, and they are making it very difficult for private lenders to compete with big banks. “It drives a wedge between us and them,” says McGrath.
AAG, which posted 658 reverse mortgages in 2010, may have a different take from that of smaller industry players.
“I don’t think the fees made a big difference to our business. It’s six of one, half dozen of the other,” says Mike Gruley, of Plymouth, Mich.-based 1st Financial Reverse Mortgages. “Even though we commonly see in the media that reverse mortgages are expensive, our experience is that consumers are not swayed by the cost; they’re swayed by not knowing how it works.”
Additionally, brokers are waiting to see how they will be affected by new loan officer compensation rules expected to take effect on April 1. A recent webinar by the National Reverse Mortgage Lenders Association on the topic of loan officer compensation discussed the new rules, how they will potentially impact lenders and brokers, and acknowledged that there are still questions remaining, pending clarification from the Federal Reserve.
Several trade groups have requested that the Fed delay the effective date of the compensation guidelines, but during the webinar, NRMLA counsel Jim Milano said the association does not believe an extension is likely beyond April 1.
Written by Elizabeth Ecker