Most would think that lowering reverse mortgage costs for consumers would be a positive thing but many in the industry feel these changes are only causing more confusion.
Dennis Haber has been voicing his opinion on the changes a lot recently, and he recently wrote that the new interest rates, elimination of the servicing fees, and other changes will only increase what he calls “the consumer confusion noise ratio”. When borrowers contact lenders and receive a variety of fees, it will only lead to consumers being more confused.
“An industry that claims to know its borrower is showing just how little it really knows and the plethora of choices will freeze the borrower into paralysis, as they fail to determine which move is better,” says Haber.
He believes that all of these choices make a borrower choose “inactivity” over moving forward and he isn’t alone.
Beth Paterson, from Reverse Mortgages SIDAC in Minnesota believes that all of the changes are adding to the fear of reverse mortgages and the stalemate of the industry. “The no origination fee is just one more change contributing to this,” says Paterson.
One would think that lower costs for the consumer would be a good thing, but clearly people think these changes are confusing borrowers.
For years the industry relied on Fannie Mae, which issued 60 day pricing commitments and essentially kept pricing simple for borrowers and lenders. However, as they left the market, everyone said we needed an alternative and we got it in Ginnie Mae.
However, now people don’t like the fluctuation in pricing even though it has made the product much more competitive and a better deal for the consumer compared to anything else available in the marketplace. If these changes are providing HECMs to consumers at a lower cost, I don’t understand how this could be viewed as a negative thing.
What do you guys think, are all of the changes confusing borrowers?