Reverse Mortgage Loan Blog

Implementation of “live” pricing by Fannie Mae could have unintended consequences for reverse mortgage borrowers and lenders. Recent changes to the way that Fannie Mae prices reverse mortgage rates and margins has been a sudden shock to those working in the reverse mortgage industry and has proven to be unnerving for many seniors embarking on getting a reverse mortgage.

Fannie Mae, the largest funding source for reverse mortgages in the U.S. is trying to entice other investors into funding and purchasing reverse mortgages. To that end, Fannie Mae has instituted what they call “live” pricing. What that means is that margins on HECM reverse mortgages can fluctuate daily, until the reverse mortgage actually funds.

Because of the fluctuating margins, senior reverse mortgage borrowers do not know until a few days before closing how much money they will actually be eligible to receive from their reverse mortgage loan.

This not only causes uncertainty for borrowers, but it places a lot of strain on reputable reverse mortgage lenders and loan officers because disclosures that were provided to the borrower(s) at the beginning of the process may not reflect the true loan amount by the time the loan is ready to close. Re-disclosure is required, and at that point, some seniors are likely to feel that they have been victims of a bait and switch scheme.

Sudden changes to something as important as how much money a person will get from a reverse mortgage loan is unnerving to say the least.

House Representative, John J. Duncan, R-Tennessee, has sent a letter to James Lockhart – director of the government agency that controls Fannie Mae, asking for a review of the rate and margin increases and the effect that the pricing changes will have on the senior population.

Let’s hope someone nips this in the bud before too much damage occurs to not only individual borrowers, but to the reverse mortgage industry’s reputation as a whole. The reverse mortgage industry absolutely CANNOT go the way of the forward mortgage market and allow for predatory pricing strategies that only line the pockets of lenders and attract the kind of loan originators that do not have the best interest of the senior client in mind.

AARP spokesperson, Bronwyn Belling said, “It’s much more of a buyer-beware environment now. It’s clear that things are not as simple as they used to be.” AARP has been instrumental in working with FHA and HUD to implement many of the safeguards that are currently in place for HECM reverse mortgages. Copies of some of these AARP reverse mortgage consumer guides are available to download free at the reverse mortgage website listed below.

Found here.

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