Fixed interest rate
I have been in the lending industry for over 30 years and 11 years ago I began a difficult path by becoming a Reverse loan consultant. By saying “difficult”, I mean that I had no idea then about the negative image the FHA loan program had at the time and still continues as of now in spite of all the excellent information that is available to put this myth to rest.
At the time of my introduction to the federal program, there was only one choice for a senior to select, unlike what has evolved in the last several years.
And that was the HECM line-of-credit. You know? An adjustable rate loan which is always the standard mortgage whether it’s a Reverse or regular loan where you draw on the money when you wish to.
Well, things changed and eventually a Fixed rate option was offered and of course due to the fact that most people are conditioned to think that having a Fixed rate is always the best choice, “some” Reverse loan consultants pushed this option on the potential senior client, using that perception to make a larger commission for themselves.
To Be Continued.
In the course of the nine years I have been a Reverse Loan Consultant, there have been many changes in the HUD program from simply one loan to several different options. In the last couple of years, we have seen a Fixed rate become available as well as a reduction in the costs of the loan to the borrower.
The new “Saver” program cuts the costs considerably and gives the senior an option of either a Fixed rate or a Line of Credit. And there is also an opportunity to use funds from a Reverse mortgage to purchase a home without having to qualify on income or credit.
Here’s a recent update on the volume of business in the Reverse loan industry:
“Reverse mortgage applications increased to 8,149 units during February, up 10.2% from the previous month according to data from the Federal Housing Administration.
While application volumes may not be as high as some would like, it’s up 22.7% from the same period last year.
During February, the seasonally adjusted annual rate for total applications rose 15.6% to an estimated 1,676,800. The actual count of applications was 114,215—9.8% over January which was seriously affected by very bad weather, said the agency. Of the total number of applications, 67,990 were purchase transactions; 38,076 were refinances; and 8,149 were for reverse mortgages.
In February, lenders endorsed 6,904 HECM units with a total max claim amount of $6.904 billion, up 6.8% from January. Of all the endorsements, 6,092 were traditional reverse mortgages, and 117 were for the HECM for purchase. HECM Saver volume continued to increase, reaching 296 units during the month, an increase of 79.4%.
Overall, FHA endorsed 88,269 mortgages with a maximum claim amount of $16.8 billion in February. This included 46,899 purchase money mortgages and 34,466 refinanced transactions.
For the purchase loans, three out of every four mortgages were for first-time home buyers, according to FHA.
With respect to the refinanced mortgage transactions, 16,459 were prior FHA cases and 18,009 were conventional mortgages converting to FHA.”
Reverse Mortgage Daily