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.
Imagine their surprise when I let them know rates have actually gone up.
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.
On the other hand those that would invest in mortgage companies were not biting at the former profit margins offered.
You gotta have people investing or the whole deal goes caput. So, profit margins increased by one percent in the last week.
It's not a small increase, at least at one time. Margins have been creeping up at 1/4 point at a time.
The higher interest rate results in a couple different effects. The first being the reverse mortgage borrowers loses equity in the home that much quicker.
And secondly, would-be borrowers will receive smaller loans.
The very fact that higher interest rates for the reverse mortgage takes away equity quickly is the reason lenders lend less money.
The bank must hedge their bets, so they loan less when rates are higher to protect their equity position is the property.
The reverse mortgage company has one great fear. That is a home value below that which the borrower owes the mortgage company.
If the mortgage company is ever in this position it is totally out of luck. It must accept the sale price of the home as repayment for the loan.
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.
Many of these folks are banking on being able to refinance their forward mortgage thereby dumping that big monthly payment. This may no longer be possible.
No one seems to be immune to these tough financial times.
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.
Imagine their surprise when I let them know rates have actually gone up.
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.
On the other hand those that would invest in mortgage companies were not biting at the former profit margins offered.
You gotta have people investing or the whole deal goes caput. So, profit margins increased by one percent in the last week.
It's not a small increase, at least at one time. Margins have been creeping up at 1/4 point at a time.
The higher interest rate results in a couple different effects. The first being the reverse mortgage borrowers loses equity in the home that much quicker.
And secondly, would-be borrowers will receive smaller loans.
The very fact that higher interest rates for the reverse mortgage takes away equity quickly is the reason lenders lend less money.
The bank must hedge their bets, so they loan less when rates are higher to protect their equity position is the property.
The reverse mortgage company has one great fear. That is a home value below that which the borrower owes the mortgage company.
If the mortgage company is ever in this position it is totally out of luck. It must accept the sale price of the home as repayment for the loan.
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.
Many of these folks are banking on being able to refinance their forward mortgage thereby dumping that big monthly payment. This may no longer be possible.
No one seems to be immune to these tough financial times.
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