Originators See Rate, Margin Variation as Reverse Mortgage Changes Shake Out

In the aftermath of the reverse mortgage rule changes last October, originators are still waiting to discover where expected rates and margins will settle as they adapt to the new landscape.

For now, many are seeing the figure fall in the 4.5% to 5.5% range, with a margin between 1.5% and 2%.

Harlan Accola, national director for reverse mortgages at Madison, Wis.-based Fairway Independent Mortgage Corp., said that it is hard to predict where numbers are going to land by the end of the year.


“Most of our expected rates are falling around the 5% to 5.5% rate area,” he said. “I don’t think things have really settled in there yet with the increases in the 10-year swap rate.”

For borrowers, the most significant changes to the program came in the form of lower principal limit factors and updated mortgage insurance premiums. On the origination side, margins and rates have taken on greater importance in the reverse mortgage world in the wake of the rule changes, which saw the so-called “rate floor” at 5.06% collapse; under the new system, changes in the expected rate affect the eventual principal limit all the way down to 3%.

Competition came swiftly, with RMD finding margins in the 2% to 2.25% range last December, just two months after the changes took effect — though some originators were hearing of margins as low as 1%.

Asked this summer about the competitive landscape, Bruce Simmons, reverse mortgage manager at American Liberty Mortgage, Inc. in Denver, said that many players in the industry are currently pricing above the floor to some degree.

“As far as the pricing of loans goes, I don’t think anyone can price at the floor right now with the index at 2.97% and the floor at 3%,” Simmons said. “The majority of my loans are priced between a 1.5% and 2% margin.”

Tim Linger, owner of HECM Senior Home Financing in Orlando, said he suspects that the expected rate will shake out at approximately 5.5% within a year and at 6% in two years, based on a 1.875% margin.

Mac Tennant, co-founder of Access Reverse Mortgage Corp. in Clearwater, Fla., said that he was seeing an expected rate of 4.47% with a 1.5% margin.

“We have seen, occasionally, margins as low as 1% from competitors, but most are in the 1.5% to 2% margin range, I think,” he said. “The highest PLF today is with the 4.18% fixed, but the revenue on that is getting really low, so I’m not sure how long we’ll see it.”

Written by Maggie Callahan

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  • Since October 2nd we are getting hit on all sides. Looking back at rate sheets on October 2nd the 1 year Libor was 1.782% and the Swap Rate was 2.240%.
    As of today we have the 1 year Libor at 2.821% and the Swap at 3.010% and rising weekly!

  • Agreed, we are getting hammered. Just priced the new RMF product for a borrower at 66 years old and they came back with a 36% LTV!
    That not a typo, the called it a LTV. I didn’t even care about the rate because the LTV was so brutal. Why LTV’s now? So they can discuss doing an interest only forward loan as a compromise I suppose.

  • Right now it is a game of Russian Roulette, we can only speculate and try and hit the number, time will tell. However, what will be will be!

    I can tell everyone this, if we dwell on what will happen and fear where everything will wind up, (Even thought the 1 year Libor and the 10 year swap rate is rising today) we will be on the losing end of the pendulum!

    Fear is our worst enemy right now, we must stay positive, confident and find new ways to approach the market. It is what it is, we hope things will change but if they don’t, we will survive.

    I remember during the Carter Administration, we saw interest rates as high as 13% and 18% and in some cases even more! But you know what, we made it through, in fact, I owned a mortgage company at the time but I came through it. I found other ways to make things happen and it worked!

    Heck, I had my home on the line, all of our savings and kids in their early teens, you do what you have to do when the going gets rough! Right now the going is rough. are you going to make it?|

    John A. Smaldone

      • George,

        You are an agitator aren’t you!

        I did not say the HECM was around during the Carter administration! I was making a comparison then versus now on rate scenarios only, NOT product!

        Further more George, do you even know when a reverse mortgage was even introduced in the market place?

        John Smaldone

      • John,

        I am not agitating. You bring up interest rates that have never applied to HECMs during a period of years when there were no HECMs while all the time referring to “we.”

        All of that took place before 1980 when many of us were finishing high school or “waiting to be born.” Next time tell us you are not talking about HECMs.

  • Good day,

    With all due respect, I am saying that George Owens can be an agitator at times! Did you see his comment rebutting things I said in my comment?

    To make it very clear, I never said the HECM was around during the Carter administration! I was just making a comparison of then versus now, on rate scenarios only, NOT product! Most reading my comment should have picked up on that.

    Further more, I asked George, if he even knew when a reverse mortgage was introduced in the market place?

    Let’s see what Georges answer back to me will be? Please, don’t get me wrong, I am not saying that George does not know the answer, on the contrary! I say this because I do not know George at all or his level of expertise! George, I give you the benefit of the doubt!

    John A. Smaldone

    • John,

      What an obtuse and vague question you ask. John, I give up on what date was a reverse mortgage introduced into the market place?

      Remember we are talking about the exact date that a reverse mortgage (not HECM) was introduced into the market place, not when it closed. Also provide us with your citation.

      This seems so childish. Why should I even care?

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