If there is no other good news at least we can pick up the news paper every morning and watch interest rates drop.
Tons of senior borrowers call me daily asking about the lower interest rates. Some of them are currently in escrow and they want to know how the lower rate changes things for them.
Imagine their surprise when I let them know rates have actually gone up.
What is going on here is two different forces. The first is truly declining interest rates. The main index used in the reverse mortgage industry for the ARM product is down to .44% this last week.
The part not talked about on the news is that investors in reverse mortgage backed securities are backing off purchasing these securities.
You gotta have people investing or the whole deal goes caput. So, profit margins increased by one percent in the last week.
The former margin was set at 1.75%. Currently at 2.75% and probably going up. That is a 36% increase.
There are a pair of important affects the rate increase will have have. To begin higher interest rates increase the rate at which the homeowner loses equity.
And secondly, would-be borrowers will receive smaller loans.
The two affects are related in the fact that the higher rates eat into the house equity more rapidly.
A reverse mortgage lender must take the home's equity very seriously. It is the lender's security. Therefore the lender lends less when rates go up.
The worst possible scenario for those investing in reverse mortgages is to have loan amount which is greater than the actual value of the property.
Lending laws don't allow lenders to come after the owners or owner's heirs for the difference. They are stuck with the home value as collateral.
Reverse mortgage borrowers planning on closing in the next thirty days will be getting some bad news from their lender. They've already been assured about how much money they will get.
Some of them are planning to pay off mortgages in attempt to eliminate that high payment. Some of these folks won't be able to pay that mortgage off now.
No one seems to be immune to these tough financial times.
Tons of senior borrowers call me daily asking about the lower interest rates. Some of them are currently in escrow and they want to know how the lower rate changes things for them.
Imagine their surprise when I let them know rates have actually gone up.
What is going on here is two different forces. The first is truly declining interest rates. The main index used in the reverse mortgage industry for the ARM product is down to .44% this last week.
The part not talked about on the news is that investors in reverse mortgage backed securities are backing off purchasing these securities.
You gotta have people investing or the whole deal goes caput. So, profit margins increased by one percent in the last week.
The former margin was set at 1.75%. Currently at 2.75% and probably going up. That is a 36% increase.
There are a pair of important affects the rate increase will have have. To begin higher interest rates increase the rate at which the homeowner loses equity.
And secondly, would-be borrowers will receive smaller loans.
The two affects are related in the fact that the higher rates eat into the house equity more rapidly.
A reverse mortgage lender must take the home's equity very seriously. It is the lender's security. Therefore the lender lends less when rates go up.
The worst possible scenario for those investing in reverse mortgages is to have loan amount which is greater than the actual value of the property.
Lending laws don't allow lenders to come after the owners or owner's heirs for the difference. They are stuck with the home value as collateral.
Reverse mortgage borrowers planning on closing in the next thirty days will be getting some bad news from their lender. They've already been assured about how much money they will get.
Some of them are planning to pay off mortgages in attempt to eliminate that high payment. Some of these folks won't be able to pay that mortgage off now.
No one seems to be immune to these tough financial times.
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