Reverse Mortgage Daily » Rates

Lock and Load; What do Reverse Mortgage Borrowers Get?

Neil Morse — Mon, 28 Mar 2011 00:02:09 +0000

Like rivalrous siblings, the forward and reverse mortgage worlds frequently sneak sideways glances at what the other is doing. Escrows? Suitability? Counseling? “Let’s see – what’s he doing now? Should I do that?” Practically speaking the two products are more unalike than similar, yet the comparison game goes on, now with a new question, this one about rate locks – or the lack thereof.

“Because the reverse mortgage business doesn’t really have any long-term rate lock provisions like the forward industry does, consumers are left unprotected when it comes to the rate they will get at closing,” argues Mike Gruley of 1st Financial Reverse Mortgages. He is referring to fixed-rate products. “In our experience, if a borrower applies for a 5.06 percent fixed-rate and the rate goes to 5.31 percent by closing, the borrower receives less money at closing. For LIBOR loans, the borrower gets the better PL [principal limit] either set at the application date or the closing date.”

“Yes,” says Jerry Wagner of Ibis Software Corporation. “HECM already has a price lock that is good for 120 days from the case number date. The borrower gets the higher of the PL as of the app date or the closing date.” And, HUD tells RMD that Mortgagee Letter 2003-16 established FHA’s policy to allow lenders to lock-in the expected interest rate, which is used to determine the principal limit, at initial loan application. Subsequent guidance, according to the federal housing agency, can be found in ML 2006-22.

Gruley adds that “for the majority of my tenure in the reverse business, rates have mostly stayed the same or gone lower, so this was not an issue. Rates have almost always moved in the borrowers’ favor. But, in today’s environment, what will happen as rates rise and loans die?” he asks, answering: “Lenders are forced to take hits on pricing.”

From an image – or better yet a personal service perspective – Shannon Hicks of Reverse Fortunes, notes that “keeping promises to the customer is key, even more so when dealing with a protected class of consumers such as seniors. A principal limit lock would be beneficial as a ‘good-faith’ promise and for many who have borderline equity to qualify paying off existing mortgage(s).” According to Hicks, “the real question is the feasibility of such a proposal in the secondary markets.”

Written by Neil Morse

Reverse Mortgage Rates Begin to Rise, Lower Proceeds for Borrowers

John Yedinak — Wed, 09 Feb 2011 23:33:27 +0000

Over the last week reverse mortgage pricing has taken a dramatic turn for the worse as rates on bonds continue to rise.

“There has been a fairly large bond market selloff in past few days,” said Jeff Traister, reverse mortgage trader at Cantor Fitzgerald. A good benchmark for Ginnie Mae’s HMBS program is the 5-year U.S. Treasury bond, said Traister, which has seen rates go from 2.021% as of Feb. 1 to 2.385% as of Feb. 8.

Source: Yahoo Finance

Due to aggressive pricing from lenders recently, some have been forced to pull back significantly as bond prices began to rise. “There were some lenders who had very aggressive pricing versus where they could execute with the street,” Traister said.

Part of the problem is that the industry is relying on the 5.09% coupon, which allows borrowers to receive the most in proceeds. If lenders started to raise the rate on the HECM fixed product, pricing would likely come back into line, but borrowers would see the amount of proceeds fall. ”We have rates going up, so we’re losing principal limit factors,” said Jeff Lewis, Chairman of Generation Mortgage. “Borrowers will likely never see the deal they had previously in terms of proceeds.”

Earlier rumors indicated that pricing had deteriorated due to Bank of America’s departure from the reverse mortgage business, but our sources say that’s not the case. Several people told RMD the trading desk was very active yesterday and a spokesperson for the Bank confirmed with RMD that it plans to continue trading Ginnie Mae’s HMBS product after the company closes its reverse mortgage division.

That suggests investor interest in the product remains, but rising rates is something the industry needs to get used to.

Reverse Mortgage Rates – April 6, 2010

John Yedinak — Tue, 06 Apr 2010 18:00:38 +0000

The average reverse mortgage borrower will see their Initial Benefits decrease by $2,750 from last week.

Ibis considers an average borrower to be a 73-year old in a $250,000 home that chooses a LIBOR+250 HECM. The rates as of 4/6/10 are:

Reverse Mortgage Rate Updates are brought to you by Jerry Wagner & Ibis Reverse Mortgage Software – The Industry Standard Since 1995. This is not just a slogan — six of the top 10 reverse mortgage originators plus NRMLA and the AARP use Ibis Software for their websites, retail and wholesale businesses.

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Reverse Mortgage Rates – March 30, 2010

John Yedinak — Tue, 30 Mar 2010 14:14:16 +0000

The average reverse mortgage borrower will see their Initial Benefits stay the same as last week.

Ibis considers an average borrower to be a 73-year old in a $250,000 home that chooses a LIBOR+250 HECM. The rates as of 3/30/10 are:

Technorati Tags: Reverse Mortgage,HECM,FHA,HUD,Rates,News

Reverse Mortgage Rates – March 16, 2010

John Yedinak — Tue, 16 Mar 2010 16:19:04 +0000

The average reverse mortgage borrower will see their Initial Benefits stay the same as last week.

Ibis considers an average borrower to be a 73-year old in a $250,000 home that chooses a LIBOR+250 HECM. The rates as of 3/16/10 are:

Technorati Tags: Reverse Mortgage,HECM,FHA,HUD,Rates,News

Reverse Mortgage Rates – March 9, 2010

John Yedinak — Tue, 09 Mar 2010 16:44:19 +0000

The average reverse mortgage borrower will see their Initial Benefits stay the same as last week.

Ibis considers an average borrower to be a 73-year old in a $250,000 home that chooses a LIBOR+250 HECM. The rates as of 3/9/10 are:

Technorati Tags: Reverse Mortgage,HECM,FHA,HUD,Rates,News

Reverse Mortgage Rates – March 2, 2010

John Yedinak — Tue, 02 Mar 2010 18:14:09 +0000

The average reverse mortgage borrower will see their Initial Benefits increase by $2,750 from last week.

Ibis considers an average borrower to be a 73-year old in a $250,000 home that chooses a LIBOR+250 HECM.

The rates as of 3/2/10 are:

Technorati Tags: Reverse Mortgage,HECM,FHA,HUD,Rates,News

Reverse Mortgage Rates – February 23, 2010

John Yedinak — Tue, 23 Feb 2010 16:22:30 +0000

The average reverse mortgage borrower will see their Initial Benefits decrease $2,750 compared to last week.

Ibis considers an average borrower to be a 73-year old in a $250,000 home that chooses a LIBOR+250 HECM.

The rates as of 2/23/10 are:

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