Where Are Reverse Mortgage Rates Going?

Jerry Wagner from Ibis sent out an interesting email about where rates might be headed… see below.

  1. The HECM locked rate is as of the date the borrower signs the App.;
  2. The HECM Principal Limit Factor lookup table use rates to the nearest one-eighths and
  3. Today’s rates are good until Monday evening the 29th.

And looking at the first four days of this week’s rates, the 10-year CM Treasury weekly average is likely to go up by 29 bp on Tuesday, and the 10-year swap rate weekly average is likely to go up by 36 bp.

That’s equivalent to a two-eighths or three-eighths percent change. A three-eighths rise will lower the benefits to the average HECM borrower by $8,000.

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We’re not marketers and don’t know how senior citizens would feel if they were told that signing an application by Monday evening may give them considerable higher benefits.

We’ve never seen times like this.

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  • Its not at App time, the HECM Expected rate is locked at either the time the FHA case number is secured or at the closing of the loan (if within 60 days) whichever is lower. The App could be taken a month before they get their counseling completed and the lender gets the counseling cert in hand, so its not at time of App.

  • (1) The lock is for 120 days, not 60; (2) The lowest Expected Rate is not always the best; and (3) The rate that is locked is the rate on the date the borrower signed the App. The case number date is the day the lock begins and it expires 120 days later. Yes, there can be a month between the App date and the case number date, effectively locking the rate for 150 days, not 120. This is one of the things that HUD worries about. Lenders could play the system by holding off on applying for a case number, thus extending the lock.

  • It is a shame that originators do not take the time to read and understand the documents they provide seniors. The principal limit lock election form provides clarity to the comments being made. Jerry Wagner’s summary correctly outlines the information contained in that form. I know nothing in the summary that is not in accordance with HUD requirements.

  • Jim says it’s too bad “originators do not take the time to read and understand the documents they provide seniors”

    Well…
    I can’t speak for all originators, but I’ve worked for and returned to a small company; and I’ve done Reverse Mortgages for M&T Bank; and my experience is that most originators do read and work at understanding the docs, and their nuances.

    However, sometimes we do get our attention diverted by title/deed problems, wells, septic tanks, property lines,clients that fool around about getting the counseling, who like to “mull things over”, or have family fights about the RM, or at anytime put things on hold to contact the attorney, neighbor, or there’s an illness in the family, or a trip that was scheduled, or the grandchild’s going to have a line in their kindergarden play that’s off in Minnesota…and the senior will be back in two weeks.

    It’s a different world; few seniors feel the same anxiety of the forward mortgage applicant about locking in the rate, or anxious about getting the loan done by a certain date unless they are in financial difficulty, or really care about the rate (they maya be retired engineers) – that much -since they aren’t paying it back anyway, and have the mind set that they aren’t moving, so, hey.

    Gloria

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