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.
I reply the rates have gone up, not down.
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 big reason rates are actually coming up is reverse mortgage investors want more profit out to these loans.
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.
How this will affect people is two fold. The first is equity will be stripped away more quickly once the indexes increase to normal levels.
The second is people will qualify to receive less money.
People receive less money when rates are higher for the very reason that equity is stripped away more quickly.
The home's equity is the lender's financial security. This being the case they have to loan less when rates are higher.
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.
Who this rate increase will effect most dramatically are those currently in escrow who have already been told how much money they will receive with the former low rates.
A good number of these people are in difficult financial positions and are attempting to pay off their forward mortgage with a reverse. This may not happen now.
We'll see how this plays out, but it's pretty tough right now.
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.
I reply the rates have gone up, not down.
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 big reason rates are actually coming up is reverse mortgage investors want more profit out to these loans.
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.
How this will affect people is two fold. The first is equity will be stripped away more quickly once the indexes increase to normal levels.
The second is people will qualify to receive less money.
People receive less money when rates are higher for the very reason that equity is stripped away more quickly.
The home's equity is the lender's financial security. This being the case they have to loan less when rates are higher.
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.
Who this rate increase will effect most dramatically are those currently in escrow who have already been told how much money they will receive with the former low rates.
A good number of these people are in difficult financial positions and are attempting to pay off their forward mortgage with a reverse. This may not happen now.
We'll see how this plays out, but it's pretty tough right now.
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