Why Your Reverse Mortgage May Have Been Transferred in Process
At this point its almost boring to discuss the mortgage crisis. I'm not even sure if it will make the Monday morning paper today.
Those taking the biggest hit, other that big backers of mortgage backed securities, have been mortgage companies offering traditional mortgages. Some of these folks are unrecognizable and other are simple out of business.
Thus far reverse mortgages have been fairly insulated from this whole fiasco.
Relative to the traditional mortgage counterpart the reverse mortgage has some very appealing traits for investors in mortgages.
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.
One would think that money necessary for such divergent products might come from different places, but it doesn't.
So, what happens if the entire warehouse line is restricted based upon events in the forward mortgage market?
Naturally, reverse mortgage take a hit and through no fault of their own.
The lousy part of this is for the people currently in escrow planning on closing on their reverse mortgage. They are being told to hold on while the broker transfers the loan to a new lending institution.
The problem is its taking much longer to close loans. Rates are going up and many of these folks wont realize as much money as they were originally told they would get out of the mortgage.
Time is of the essence for reverse mortgages more so than under normal market conditions. Increasing lender margins effectively limit borrowing power if the loan doesn't close before the rate increase.
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.
Getting a reverse mortgage thus far has been a piece of cake. This new arrival has made things a little bumpy.
Those taking the biggest hit, other that big backers of mortgage backed securities, have been mortgage companies offering traditional mortgages. Some of these folks are unrecognizable and other are simple out of business.
Thus far reverse mortgages have been fairly insulated from this whole fiasco.
Relative to the traditional mortgage counterpart the reverse mortgage has some very appealing traits for investors in mortgages.
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.
One would think that money necessary for such divergent products might come from different places, but it doesn't.
So, what happens if the entire warehouse line is restricted based upon events in the forward mortgage market?
Naturally, reverse mortgage take a hit and through no fault of their own.
The lousy part of this is for the people currently in escrow planning on closing on their reverse mortgage. They are being told to hold on while the broker transfers the loan to a new lending institution.
The problem is its taking much longer to close loans. Rates are going up and many of these folks wont realize as much money as they were originally told they would get out of the mortgage.
Time is of the essence for reverse mortgages more so than under normal market conditions. Increasing lender margins effectively limit borrowing power if the loan doesn't close before the rate increase.
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.
Getting a reverse mortgage thus far has been a piece of cake. This new arrival has made things a little bumpy.
About the Author:
Learn the most prevalent seven myths regarding the California Reverse mortgage here. Also, the twenty commonly asked California reverse mortgage questions answered at this website.
posted by Credit Counseling at
2:13 PM
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