When seniors decide to go with a reverse mortgage, the majority pick the credit-line option. There are several motives for this, but we'll tackle that another time. The point here is to inform you that, industry wide, the margins reverse mortgage companies charge will go up this week by, at the very minimum, 1/2 percent. What the heck is a margin? I was getting to that. The margin is the profit built into the loan by the bank and those that would put their money into mortgage backed securities. The line of credit based on the constant maturity treasury index is what almost all borrowers of a reverse mortgages were using if the went forward with a reverse mortgage with a line of credit. The treasury index read .40 percent seven days ago, and the margin the mortgage companies charged was 1.75 percent. To find the actual rate of interest for the loan just combine these two numbers, which would equal 2.15 percent. Fannie Mae (the organization who secures secondary loans) has now forewarned that the bank's margin will increase at least a half percent. The borrower won't really see any huge negatives from this. Up to this point we've been blessed by interest rates being below FHA's ground rate. This rate is what is used to figure the most money a lender can allocate to the borrower. How much a senior is loaned and interest go hand in hand. A loan will be higher if the interest is lower. It goes the other way as well until the ground FHA rate is reached. Then any interest rate less than that rate will not make the loan higher. At current standing the floor rate is high above us. This means the marginal increase, thankfully, will not put reverse mortgage borrowers above it. So it is still fine to use a estimate given to you in the last couple weeks. The higher marginal charge will deduct from the equity in the home more quickly. Yes, I just mentioned a negative of the reverse mortgage. But remember the senior won't be paying anyone, which is a huge plus. So the bad news is interest is gathering against property equity. This increased marginal charge will just have it gather slightly faster.
The number one FHA and VA loan producer, Rodney Anderson proposed a streamline refinancing-patterned policy hoping it would be the solution to the foreclosure-caused housing slump. The program intended for Fannie Mae and Freddie Mac to implement is also expected to cause economic stimulation and monthly federal income from mortgage insurances.
The government FHA and VA streamline refinances have been effective for 20 to 30 years. To adapt to the recent needs in the foreclosure crisis, with a little common sense and a few adjustments it could be implemented for more beneficiaries. Good borrowers, on-time payers can dodge loan delinquency and even home repossession.
The streamline refinance policy in effect allow debtors who has been current in 12 or more of their most recent FHA or VA payments to refinance in more affordable loan rates without re-qualifying.
In this revised program, Fannie Mae and Freddie Mac will implement the same policy to compliant loans and borrowers with a 12-month on-time payment record.
Responsible lending. This proposed streamline refinancing is for the noble borrowers who will benefit by refinancing with more manageable interest rates. This will hopefully protect them from foreclosure.
But lenders must be protected. So, mortgage insurance must be mandated to 30 to 40 percent rather than the old standard of 22 percent. Borrower protection from deceitful lenders must be implemented too. With monthly loan insurance payments, the government will even have an inflow of revenue from the borrowers.
With the continuous increasing of repossession cases, the brilliant revision of Fannie Mae and Freddie Mac of the streamline refinancing policy is just in time. Though this is not enough to save the housing industry and homeowners from foreclosure, it is a great initial step in the long awaited economic recovery.
Both Spikoliolio Vanrock & Joseph Smith are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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