When banks compete, government loans lag
As I have often chronicled on this site, the Big Boys of Mortgage Banking, (Wells Fargo, Bank of America, Countrywide, etc.) are just warming up with their push to grow and win over the reverse mortgage market. The most intriguing trait of these big banks is their innate ability to cut out the costs that are found in government backed HEMC loans and create their own proprietary products that are much more consumer friendly. Whether you are for or against reverse mortgages, it is clear to see that banking competition is helping to drive down fat broker fees that have been a large part of critics’ argument against them. The Real Estate Journal had this to say in a recent article.
For instance, Bank of America, which recently acquired the reverse-mortgage business of Seattle Mortgage Company, said it will soon launch nationwide a reverse-mortgage product it’s offered to customers in Arizona since November. The product, called Senior Equity Maximizer, offers loans on up to $10 million of home equity, said Colin McCormick, reverse-mortgage product executive at Bank of America.
Bank of America’s product allows you to set aside a portion of your home’s equity to be preserved for your heirs, and the fees charged are a lower percentage of the home’s value than those charged on traditional reverse-mortgage loans. But the interest rate on the bank’s new product is generally higher, McCormick said.
Today about 90% of reverse mortgages are the traditional government-backed product, the most prevalent of which is the Federal Housing Administration’s home equity conversion mortgage, according to the National Reverse Mortgage Lenders Association, a trade group.
Borrowers have taken out about 71,500 new FHA-based reverse mortgages so far this fiscal year (which began Oct. 1), a 49% jump from about 48,000 loans in the same period a year earlier. From 1990 through to the present, about 310,000 such loans have been taken out, according to the NRMLA. Full Story
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[...] can be a real blessing. The issue comes when unscrupulous lenders tack on excess fees. With reverse mortgage fees becoming more competitive while HECM limits increase, the writing is on the wall for class action [...]