Interest Rates Increase for Reverse Mortgages
If all else fails in the economy at least we can turn the TV on and see how interest rate continue to decline in the Fed's effort to stimulate the economy.
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.
Their logic is not incorrect. In actuality interest rates have come down. In fact the Constant Maturity Treasure Index is now down to point forty-four percent. The thing is this not the only factor.
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.
To put this in direct terms reverse mortgage margins just went up thirty six percent.
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 other affect is a lower loan size.
The very fact that higher interest rates for the reverse mortgage takes away equity quickly is the reason lenders lend less money.
The home's equity is the lender's financial security. This being the case they have to loan less when rates are higher.
The reverse mortgage company has one great fear. That is a home value below that which the borrower owes the mortgage company.
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.
These tough times are hitting everyone.
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.
Their logic is not incorrect. In actuality interest rates have come down. In fact the Constant Maturity Treasure Index is now down to point forty-four percent. The thing is this not the only factor.
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.
To put this in direct terms reverse mortgage margins just went up thirty six percent.
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 other affect is a lower loan size.
The very fact that higher interest rates for the reverse mortgage takes away equity quickly is the reason lenders lend less money.
The home's equity is the lender's financial security. This being the case they have to loan less when rates are higher.
The reverse mortgage company has one great fear. That is a home value below that which the borrower owes the mortgage company.
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.
These tough times are hitting everyone.
posted by Debt Consolidation Loan at
8:10 AM
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