Do I even need to bring up the fact that we are still in a mortgage crisis? I think its pretty part of the landscape and the papers assume people don't want to hear about it until its over.
Of course, many companies offering these mortgages have changed as well. Some have been sold for pennies on the dollar and have changed their names. Some are no longer in business at all.
Thus far reverse mortgages have been fairly insulated from this whole fiasco.
I mean lets face it, the reverse has some built in positives investors in todays mortgage backed securities probably like.
One of the most important differences between the reverse and the traditional mortgage is the HECM does not require periodic interest payments. This dramatically reduces risk.
Where we are seeing trouble, however, is in the fact that some companies who lend reverse mortgage money also lend traditional mortgage money out of the same warehouse line.
The warehouse lines are not necessarily broken up between reverse and forward mortgages. All money comes from the same kitty.
Since we are seeing so much trouble in the forward mortgage arena it goes to follow that these warehouse lines might be affected negatively. What happens if the line gets temporarily or permanently shut off?
Of course the money made of available for the reverse mortgage gets severely limited. This is currently happening.
This is a bad deal for the bank as it temporarily loses that stream of income. And its bad for the consumer who may be in the process of getting the reverse only to be told mid stream that his deal must be sent to a new lender.
The consumer can take a hit in that it is taking much longer to close a loan being transferred to another lender. We are in an increasing interest rate environment contrary to what you're reading elsewhere. When rates go up mid stream the consumer can realize less money.
You see rate locks are not a reality in the reverse mortgage business and increasing lender margins will effectively reduce the amount a borrower qualifies to receive.
How can this affect someone? It can constrict the loan amount enough to the point where a borrower can no longer pay off a big bill or a forward mortgage currently sucking away most of the disposable income.
We hope this is a temporary problem. Just be careful of this if getting a HECM and dont spend the money until you have it.
Of course, many companies offering these mortgages have changed as well. Some have been sold for pennies on the dollar and have changed their names. Some are no longer in business at all.
Thus far reverse mortgages have been fairly insulated from this whole fiasco.
I mean lets face it, the reverse has some built in positives investors in todays mortgage backed securities probably like.
One of the most important differences between the reverse and the traditional mortgage is the HECM does not require periodic interest payments. This dramatically reduces risk.
Where we are seeing trouble, however, is in the fact that some companies who lend reverse mortgage money also lend traditional mortgage money out of the same warehouse line.
The warehouse lines are not necessarily broken up between reverse and forward mortgages. All money comes from the same kitty.
Since we are seeing so much trouble in the forward mortgage arena it goes to follow that these warehouse lines might be affected negatively. What happens if the line gets temporarily or permanently shut off?
Of course the money made of available for the reverse mortgage gets severely limited. This is currently happening.
This is a bad deal for the bank as it temporarily loses that stream of income. And its bad for the consumer who may be in the process of getting the reverse only to be told mid stream that his deal must be sent to a new lender.
The consumer can take a hit in that it is taking much longer to close a loan being transferred to another lender. We are in an increasing interest rate environment contrary to what you're reading elsewhere. When rates go up mid stream the consumer can realize less money.
You see rate locks are not a reality in the reverse mortgage business and increasing lender margins will effectively reduce the amount a borrower qualifies to receive.
How can this affect someone? It can constrict the loan amount enough to the point where a borrower can no longer pay off a big bill or a forward mortgage currently sucking away most of the disposable income.
We hope this is a temporary problem. Just be careful of this if getting a HECM and dont spend the money until you have it.
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Find the seven most misunderstood assumptions regarding the California Reverse mortgage here. Also, the twenty commonly asked California reverse mortgage questions answered at this website.
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