So you thought 2009 would be a great time for the reverse mortgage industry, right? With the new laws as a result of the modernization bill, and all of the new seniors in need as a result of the credit and housing crisis, we'd be up to our eyeballs awash with demand for business, and the lenders would be more than willing to accommodate all of the new business..
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right? WRONG!!!! The current mess in the US has investors worried so badly that they are demanding that the products that they buy be rock solid investments from the start, the opposite of the packaged securities that they bought willy nilly just a few months back that were loaded with risky investments that as we all now know are the base of the housing collapse.
But reverse mortgages, backed by FHA, have to be safe bets, right? Well, I certainly thought so.
And then 2009 started, and due to the below floor index rates that are a reality today, the lenders have been forced, by the investors who buy the loans, to increase the margins that they charge over the life of the loan, affecting their total loan balance in the long run.
So, lets recap.
The FHA insured loans are regulated by HUD, and then sold on the secondary market from the lenders (approved by FHA) to Fannie Mae and Freddy Mack, which are now government controlled entities..
..
..
WHAT!?!?!? What used to be a product that had margins ranging from 1.
0 - 1.
75 are now using margins that range from 2.
0 to 3.
1.
This has little effect on the amount of money available for borrowers, but will cost them in comparison to the lower margin products in the long run.
So..
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new margins across the board, a major lender ceasing accepting loans for 2 weeks, and daily pricing..
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are you REALLY ready for 2009?!!?!?