Search:

News by Subject
Complete list of specialty news sections.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Mortgage Industry News
Subscription-based news for people who work in real estate finance.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage News Reprints
Put entire MortgageDaily.com stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed MortgageDaily.com stories for your web site or for your RSS reader.

News Archives
Archive of news entries.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Graphs
Directory of lenders, branch operators and mortgage service providers.
home advertise email RSS about us
 
HOT Topics Rates Glossary LO License Search
Consumer Mortgage News
Free mortgage news for current and prospective borrowers from a leading online mortgage industry news publication.



Choosing Best Reverse Mortgage Lender

The Mortgage Professor: Selecting HECM lender with best deal

Oct. 29, 2015

By JACK GUTTENTAG The Mortgage Professor - Tribune News Service


My article last week was the first installment of a two-part series on how a senior can safely navigate the highly dysfunctional reverse mortgage market.

I suggested that the first step is to choose the combination of reverse mortgage features that best meets your needs, which can be done effectively using my home-equity conversion mortgage, or HECM, calculator, with or without the pro bono help of an expert.

The second step, discussed below, is to find the lender offering the best deal on the particular HECM you have selected.
  • Reverse mortgages have two lender price components: the interest rate and the origination fee.

    The trade off between them depends on how long you will have the mortgage -- the longer you have it, the more important is the rate relative to the origination fee.

  • The stakes are high: In many markets, including the market for standard home mortgages, the difference between the most competitive price and the "next-best" price is modest, but in the HECM reverse mortgage market it can be huge.

    I have seen rate differences of more than 1 percent and origination fee differences exceeding $14,000.

    Among the reasons is that seniors tend to focus on the amounts they can draw rather than what it will cost, and lenders cater to that.

    With very few exceptions, lender websites do not disclose prices, and (until now) there have been no published data on reverse mortgage prices anywhere.

  • HUD also plays a role in generating large price disparities by setting maximum origination fees.

    This allows lenders to charge the maximum fee in cases where they should be paying rebates, by telling the borrower that "the government sets the origination fee."

  • A little knowledge helps: The market value of a reverse mortgage to the lender originating it depends, among other things, on the initial loan amount.

    This consists of upfront cash draws including repayment of any existing mortgage balance, plus financed settlement costs.

  • If there are two transactions that are identical in all respects except that in one case the borrower is drawing the maximum amount possible in cash while in the other the borrower retains her entire borrowing power as an unused credit line, the lender will sell the first at a significantly higher price.

    In such case, the borrower who draws more cash should get a lower price, and will in the small competitive segment of the market.

    In the mainstream market, however, the mortgage with greater market value is more likely to generate a larger markup for the lender.

  • Where do you find competitive prices of your transaction?

    The best rule for finding lenders who don't overcharge is to seek them on multi-lender shopping sites, where their prices can be compared to those of others.

    The difference is that there are about eight or nine multi-lender sites covering standard mortgages.

  • Remember, a price quote is just a quote until it is locked: A price quote is not binding on the lender until it is locked, which does not happen until the house has been appraised, the application has been processed, and the prospective borrower has been counseled.

    The lock price should be the price the lender is quoting to new shoppers on the lock day, which on a multi-lender shopping site the borrower can check.

    In the mainstream market, lots of luck.


About the Writer
Jack Guttentag is professor emeritus of finance at the Wharton School of the University of Pennsylvania.

next story

back to home page


To see more of The Mortgage Professor or to subscribe to the newspaper, go to www.mtgprofessor.com

Copyright (c) 2015, The Mortgage Professor

Distributed by Tribune News Service.


This story was distributed by TNS - Tribune News Service
 
Refinance News
News about refinance programs, pricing and production.
H A R P 2.0 News
News stories about the H o m e Affordable Refinance Program including expanded program guidelines.





Copyright © 2016 MortgageDaily.com
MortgageDaily.com Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

pricing engine directory

wholesale lender directory

More Mortgage News Resources (MortgageDaily.com full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

free mortgage news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter

MBS

mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

refinance news

reverse mortgage news

sales blog

secondary marketing

servicing news

subprime news

wholesale lenders

wireless mortgage news