Things just got more interesting in the reverse mortgage industry. Fannie Mae, the company which securitizes reverse mortgages on the secondary market, has changed how we price our loans.

Formerly I could give a customer hard numbers immediately. In other words I could tell them which interest rate and how much money they qualify to receive right off the bat.

In fact the quote, if the customer went forward, would be good for 120 days.

This is no longer the case. Today reverse mortgage feel more like forward mortgages in that interest rate pricing is done with varying lock periods. And pricing can change day to day prior to locking rates.

Since most reverse mortgages take longer than the lock periods some customers will get burned. Quite a few senior borrowers are banking on the reverse mortgage to come in and pay off their forward mortgage.

Getting rid of the payment associated with the mortgage is their main goal.

Where I can see a problem is that interest rates play a major role in how much money a borrower can receive for the reverse mortgage. Too often the reverse mortgage is just enough to pay off the forward mortgage.

The amount of money a borrower receives is inversely associated with the interest rate. For instance, when rates are low, the borrower gets more money. Conversely when they go up, the borrower gets less.

Since some buyers are right on the cusp, they will be quoted one day. The lender will say, "good news, looks like you'll be able to pay off your mortgage".

Here is the worst case scenario. The customer goes through the process, gets counseling, application, even an appraisal and finally can lock in the loan. If rates take a turn for the worse during that period this loan is toast.

At this point what are the choices for this customer? He can either wait for interest rates to drop back down or pay the difference in cash.

This is the down side. The up side for the borrower is it will force lenders to be competitive in their pricing.

The new pricing should offer a better experience for customers such that it should, because of its complexity, sift out some of the weak reverse mortgage loan officers.

The stronger, more knowledgeable LOs will see this as old hat, know how to explain it, and probably garner more of the business.