A Washington Post article published this week addresses the issue of private reverse mortgage products and the decline in reverse mortgage product offerings, which it attributes to fewer active lenders in the business.
The article, titled “Companies cut out reverse mortgages,” discusses the exit of former jumbo leader Financial Freedom, as well as departures by Seattle Mortgage, Bank of America and the decline of Wells Fargo’s wholesale broker program.
The lack of jumbo product offerings is also attributable to new compensation rules for loan salespeople, according to the article.
“New compensation rules for loan salespeople are the most-speculated reason for the stoppage, but lenders cite a need to return to ‘core businesses’ as the prime mover,” the article states. “The bottom line is that seniors will have fewer places to look to pull money out of their homes.”
The Post outlines the recent life of jumbo products, which it says became “decimated” by the credit crisis in 2008 and deterred investors. One of the few still available, it says, is the Generation Mortgage’s Generation Plus Loan, which “targets owners older than 62 with homes appraising between $500,000 and $6 million.” Unlike the HECM, insured by HUD, the jumbo requires no mortgage insurance and has a higher interest rate, it says.
“Most seniors are better served by the HECM. Customers can receive the funds in a variety of ways (lump sum, monthly draw, line of credit, or a combination), and the interest rate on that fixed-rate product at press time was approximately 5.5%,” the article states. “The up-front mortgage insurance brings the actual rate closer to 6.75%.”
Read the Washington Post article.
Written by Elizabeth Ecker