Reverse Mortgage Calculators Playing The Bait & Switch Game?

image Today a friend from California sent me an email with questions about his mother getting a reverse mortgage and attached was a printout from Sun West showing a comparison of the different products.  Looked normal, a LIBOR and CMT based HECM along with the HECM fixed.

I was about to respond to the email saying that everything looked ok but then I noticed something… LIBOR was calculated  with a 2.250% margin and the CMT based product had a margin of 2.500%.  Now, all of us know that Fannie Mae raised margins drastically a few weeks ago so why are they continuing to offer these type of rates on their websites?

I thought maybe they had some unbelievable pricing that no one else was offering so I took a look at their rate sheet they send to brokers and saw the following:

Margin CMT 15 Days 25 Days
2.5 1.444 1.537
Margin LIBOR 15 Days 25 Days
2.25 0.725 0.85

Now call me crazy but is Sun West really willing to eat that much YSP on loans to beat the competition?  In all fairness, it’s probably an honest mistake but it can have some big issues for its wholesale clients since many use their branded calculators. 

You can see the one they made for RMD here, or you can use their retail calculator to get a great deal on a reverse mortgage.  Can you say Bait & Switch?

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  • None of them take YSP hit. In every case I have seen, broker takes the hit. Need to start looking at YSP’s before quoting rates to prospect, and adjust margins if broker wants to stay in business.

  • WELCOME to the FORWARD WORLD! They warned us about this years ago while at Wells…..this should weed out the pretenders and bring this back a bit to where it should be, with the consumer building a TRUST based relationship in which LIVE pricing is explained and understood. “Bait and Switch” will never be a part of my lexicon!

  • Just narrowly escaped a $7000 over run (major) due to similar business tatics which resulted in a late charge (minor-something we always avoid)tarnishing our excellent payment record.

  • Has anyone sent this to NRMLA or HUD? I don’t think I’ll attempt to do a loan with Sun West anytime soon. With practices such as this…doesn’t look like later will be an option!

  • I know we can’t talk to everyone before they visit web sites with on line calculators and if those sites are distributing eronious information we (the honest Mortgage Brokers) are the one’s that are asked the tough questions.
    I simply respond with something like this; “Web sites that are visited by consumers offer the basics on Reverse Mortgages. Normally their rates are not up to date as rates can change daily. The examples they show you are just that, examples. Closing cost can play a part in the final numbers as well so any comparison you make should be obtained from a Local Reverse Mortgage Specialist”. That’s another reason that I don’t use (Brand X) for my clients loans.

  • I started doing reverse mortgages eons ago when it was taking Financial Freedom, Seattle Mortgage and Wells 90-120 days on average to underwrite and fund my loans and there was no 120 day Principal Limit Lock Disclosure so I needed to explain to my clients that the proposal I was discussing with them at the kitchen table was based on the interest rates for that week and consequently the numbers that the HECM counselor ran subsequently would differ because of the weekly change in the rates and I then encourage them to undergo counseling ASAP. Next they would call me when the received their HECM ceritificate(s)and I would visit with them to initiate the preliminary application package and would disclose to them that the lender would process, approve the application and draw up the final documents based on the appraised value and current interest rates at that time. I kept in touch with the lender and my client on weekly basis without fail.

    Of course this was during a period of increasing property values so the climate was better with regard to how much money they would end up with when the final documents were drawn. My point is that today, I still inform my clients that the amount that they will be entitled to receive will depend on the final approval of the lender who will set the loan amount based on market conditions with regard to appraised value of property and current interest rates. Additionally,I always obtain the HUD-1 numbers and discuss them in depth ahead of having the notary visit with them for final signing and I attend the meeting with the notary with the majority of my clients (95+% of the time).

    I agree that the current climate for promoting HECMs is getting worse but I intend to stay the course because I am glad that I chose not get involved with sub-prime lending and as a Certified Senior Advisor (CSA), I truly enjoy visiting with the senior members of my community and doing my small part to enhance their lifestyle.

    Works for me.

  • Out of curiosity and in anonymity do YOU as an orignator participate in the YSP AND the origination fee? At our shop, the originator is only commisioned off the origination fee…….

    Responses here welcomed

  • This again was mentioned some time ago on where they pointed out that almost all of the national calculators either had an old margin or wasn’t properly using the state based fees for each calculation. The example was for a reverse mortgage quote in Maryland costing the same as one in California which just isn’t true. For some reason Maryland and some other states have recordation fees that can be quite excessive and the national calcualtors do not reflect those additional fees and some of the lenders try to shrug it off that they aren’t “their” fees but the state’s fees. Simply stated, our seniors deserve to know where every penny is going, hence the reason the set aside is listed in the calculation, it doesn’t have to be there but HUD did a great job by including it in their public facing numbers.

    This has been going on for some time but when margins were static you wouldn’t notice it.

  • Peter, a lot of the reverse mortgage companies keep the ysp and tell there subordinates at their shops that there is no money in the yeild. do not believe that for one bit! If you look at your HUD you can see the money going to the broker. My suggestion is that you learn all that you can from your company and look for a better one. I went threw it and friends of mine they call it their “model of doing business” its their model for taking your hard earned money and giving you a referral fee instead.

  • The confusion is they price backwards: they pay YSP on the negative figures. I verified this with SunWest a week or so ago


    RATE 15 DAYS 25 DAYS
    3.250 -0.056 0.037
    3.000 0.444 0.537

  • Peter says: “Out of curiosity and in anonymity do YOU as an orignator participate in the YSP AND the origination fee?”

    Out company (FutureSafe Financial) compensates our people on both YSP and the origination.

    Cheryl: “The confusion is they price backwards: they pay YSP on the negative figures.”

    The negative pricing basically means that the company (or originator & company if the LO participates in the backend) will have to pay the lender (out of the origination) to get the loan done.

  • Not knowing the specifics of the situation of why Sun West would send out such an inaccurate quote it brings a couple of things to mind:

    1. The broker could have made an honest mistake (a real bad one at that)
    2. Many unscrupulous originators try to compete with you by quoting unreal margins
    3. Thanks to Fannie Mae, many company online calculators have yet to catch up
    4. Make sure your client knows what today’s true margin is and to watch out for companies promising a lower margin and switching to the real margin.

    Keep an eye on what your competition is quoting and make sure your client knows who sets the margin and what a margin is in the first place. I agree, we’ve moved into the territory that forward originators have had to tread for so many years.

  • I think that people should do a little more research before writing articles or posting responses.

    Firstly, what was the date when this comparison was run? Anyone who is actually in this industry knows that there has been a very dramatic change in pricing over the past couple weeks. If this scenario was run 1 month ago, it would have been a very realistic loan.

    Secondly, if this is Sun West, not some correspondent lender or broker, they CAN offer this type of pricing, even if it isnt available elsewhere and even if it appears as a negative YSP on their correspondent rate sheets. They are not beholden to the rates they offer their correspondents.

    Most importantly, MANY brokers offer a lower YSP product to help their clients. If you have a loan that wont qualify unless the rate is lower, then you right the lower rate. Unlike the forward business, the origination fee on HECMs is substantial and can be used to absorb a negative YSP if necessary.

    Also, YSP is only paid on UPB. Thus, if the borrower was taking a credit line and no cash up front, as many do, the total cost of a negative YSP may be a around $100.

    I am not saying that we shouldnt be watching for bait and switch tactics, but there is clearly not enough detail or understanding of reverse mortgages presented herein to even attempt to make such a determination.

  • We use SWMC and a couple of other companies. We have had some issue with SWMC, but their reversesoft is very good.

    First, an email was sent to all their coorespant about the programing going down friday night for upgrading and going back online sunday night.

    Second, they allow you to pick the margin, so if you select the “wrong” margin, you can loss money as some of our loan officers who do not want to reveiw have learned. I really do not know if this effected the consumer side, but if the upgrade was going thru, it might be the reason.

    Third, I believe very person needs to reveiw and be on their game with very rm software. When we use a different software we learn it!


  • Guys – I have used Sun West for Years and before you go start slamming a lender look at the source — look at the calculator. I just went to the calculator again. You can pick your own margain. Or run a scenario…. This looks like it was run with MAXAMIZE PRINCIPLE LIMIT scenario. Which means – give the borrower the most money possible. SO WHO EVER ran this — does not know how to price Reverse Loans. I BET IT WAS A COMPETITOR OF SUN WEST or a SALES EXECUTIVE from ANOTHER COMPANY – trying to create a fuss.

  • The days of ‘bait and switch’ have come to the rvm business. Inexperienced LO’s are ‘selling’ CMT’s and LIBORs that aren’t even avail from most lenders, and have no idea of current pricing. When the LO sells the lower margin product and then ‘finds out’ during UR or right before closing, that she/he has to bring $4,000 + to closing, the LO will switch the bwr to a more vialble product.

    The counseling agencies do NOT have the current rates, nor do they understand Expected Interest Rate vs Initial Rate. The counselors do NOT have a clue that we, the LO’s have to bring money to closing, when they convince a bwr to get a 2.75 CMT. On a $625k, all cash out at closing, that’s about $4646 of my money at closing, with the current pricing. (And I only would have made $6000 orig. fee!!)

    Just today, a counselor quoted my client a 2.81% Initial Rate. Not even close! And of course, the client called me right away and wanted the ‘lower’ rate.

  • It took 10 days for Sunwest to create my personally branded calculator. I tested it by submitting a request to have someone call me, because I wanted to see the “auto reply” that was sent back to the consumer. While I waited for the auto reply I read the literature that was provided to the consumer and was surprised it was Fannie Mae’s booklet, but the sections that said “contact Fannie Mae at this 800 number if you have questions” was changed to “contact Sunwest at this 800 number if you have questions”. Less then an hour later a Retail Reverse Originator from Sunwest responded to my “test inquiry”.

    So my personally branded Sunwest Calculator contained “me” on the outside but sent all the consumer inquiries to Sunwest.

    I called my AE and left a message, but she never returned my call.

    If you have a branded Sunwest calculator, do yourself a favor and thoroughly test it. Make sure the literature points back to you and that you’re receiving all the customers’ inquiries. I’m glad I did because I was getting ready to advertise Nationally with Google’s Paid Per Click technology, and it would have resulted in Sunwest receiving all my leads.

  • THANK YOU for the Heads up on Sunwest.
    When are these “lenders”, like Suntrust, going to figure out that if they treat, our customers, and us fairly we will be loyal to them and send them the majority of our business.
    If I don’t need to worry about the “lender” (Suntrust in this case)trying to pirate my customers I can reccomend them as a good company when my customer ask me why the loan is being done thru them.
    Personally I have always had a very good relationship with JB NUTTER. They don’t do retail (except in Kansas City) and they are not my competition.
    I’m thinking before I send any loans to Suntrust every body else will be out of business.

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