Reverse Mortgage Pioneers – Welcome to the Wild Wild West

Friday, 30 April 2010 12:32

Articles - The Last Word

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Timing is critical for any business and what better time than now to be in the reverse mortgage business. Opportunities abound for those who go after the business.
 
Lenders are positioning themselves to maintain and grow their market share of the senior reverse mortgage business. With the elimination of the Service Fee Set Aside and Monthly Service Fee on fixed rate HECMs, this change has opened up the market place in many ways. Now many more senior homeowners will qualify for a reverse mortgage, which opens up a shift in profit opportunities for originators.

In October, when the new principal loan limit formula was reduced, coupled with continued reductions in home values and consumer confidence, there was a major impact on reverse mortgage originations. This was witnessed by most of us seeing our originations falling at or near 2007 levels. The move by lenders to eliminate the Service Fee Set Aside and Monthly Service Fee has and will impact origination growth positively and return growth to the industry.

Other significant changes, such as reductions in upfront origination fees are also having a significant impact on senior clients and originators. Most recently, one lender has now eliminated upfront origination fees for the HECM monthly adjustable and there are surely others that will follow in order to maintain their market share.

Regardless of whether you are an originator, correspondent/broker or lender, you are being challenged. How long will these changes last? How should you do your pricing? As we are often reminded, our business is under a constant microscope from many venues. I made a prediction two years ago, that at some point we will move closer to mirroring the forward business and it appears that that time may have arrived. So be it, competition is good and the winners are, no doubt, our senior clients, which is the way it is supposed to work.

Exciting times is an understatement! What will be next? Stick around and we will surely see more changes. Welcome to the Wild, Wild West!