In November Fannie Mae announced it was making the move to “Live Pricing” for reverse mortgages, which allows lenders to obtain reverse mortgage commitments ranging 2 to 90 days. Prior to the change, FNMA only priced reverse mortgages in 60-day forward negotiated (or “static”) commitments based upon reverse mortgage delivery.
FNMA’s move to live pricing is evidence that the reverse mortgage industry is transitioning itself to the secondary market that exists in the forward business. Eventually lenders will start sending out daily rate sheets with loan by loan margins and should lead to more consistent and competitive pricing.
In anticipation of the changes, Generation Mortgage developed a complete secondary market package that can be utilized by its wholesale and correspondent customers. The package describes all policies and procedures for execution and provides proprietary software to manage margin/rate lock forms and confirmations. Generation is using it as a training vehicle to educate its customers on all of the policies, procedures, and risks that are associated with live pricing.
“Live and market driven pricing is here to stay,” said Sherry Apanay, SVP and head of the Wholesale/Correspondent Division at Generation. “It is imperative that each individual seller becomes familiar with the risks and procedures associated with managing their pipelines. Understanding mandatory margin/rate locks and the risks of non-delivery, lock extensions, and changes are key to their success and profitability”.
Generation made the switch earlier this week and the response from its wholesale clients has been very positive. I’d expect other lenders to start making the transition early next year.