In August of 2008, Fannie Mae announced that November 2nd, 2008 would be the last day lenders could price reverse mortgages using 60 day forward commitments. After Nov 2, lenders would be required to use “live pricing” which offers periods ranging from 2-90 day commitment periods.Instead making the move to live pricing on Nov 3, most reverse mortgage lenders took one last 60 day forward commitment and locked in their pricing for the rest of 2008.
According to people that I’ve talked to all of these loans were due to FNMA this week.It appears this created a backup of loans at FNMA and now wholesalers are experiencing significant delays in obtaining reimbursements. A notice sent out by JB Nutter today details the problem (note, JB doesn’t say it’s FNMA, but we all know they’re the only ones buying HECMs):
The latest repercussion from our nation’s lending crisis is just now being felt.
For years, when a wholesale reverse mortgage lender delivered a loan to an investor, funds were transferred back to the wholesale lender in a timely manner, usually within 24-48 hours.
Beginning last Friday, however, we unexpectedly began to experience significant delays in obtaining reimbursements from our investors. When we say significant, we mean significant.
James B. Nutter & Company is a 57-year old mortgage banking firm with a sizeable net worth and no debt, but even our warehouse lines have their limit. We cannot allow a substantial receivable deficit to compromise our strength.
As such, effective Friday January 9th, we are implementing a two-week moratorium on new file submissions. Rest assured the moratorium is temporary, and all current loans in the pipeline will continue to be underwritten and closed.
We have received assurances that this unexpected interruption will be corrected shortly. We apologize in advance for any inconvenience that this will cause both you and your clients, but the situation is unavoidable. Our entire staff is at your disposal, ready to answer any questions and guide you through this temporary delay. We are hiring personnel and working lots of overtime to work through this bottleneck.
One executive at a leading wholesaler that I spoke with today said, ” No matter the size of the company or how you operate, this is not a positive impact as it drains cash and makes companies have to float the money longer. We have seen a slight delay in some of their purchases. All I can say is this is bad for the industry and bad for seniors.”This is why we need more than one outlet for HECMs…