If you have ever seen a reverse mortgage quote, you know that it looks quite different than traditional loan quotes.  In case you haven’t, you can see a sample reverse mortgage quote as you read the explanation.

As an aside, don’t confuse the results produced by an online reverse mortgage calculator with an actual quote for a reverse mortgage. These online calculators are helpful in that they, in an instant, can tell you whether the senior is likely to qualify.  They can offer information on how much money the senior might get and in what forms they can receive it. But there are questions that these online calculators do not answer, such as interest rate details, closing costs and which of the programs presented are the best of all available choices for this particular senior. For that information, you need a quote.

There are a number of key elements found in a reverse mortgage quote.  It will usually offer a comparison of two to three programs in side-by-side columns.  Each column will have some form of the items listed below that define the basic financial terms of the loan.  All of these terms may or may not appear on your particular quote since different reverse mortgage lenders use slightly different quote forms.

1. Program Description.  Be aware that you are looking at just a small sampling of the available reverse mortgage programs since there are 10 to 15 available in United States.
2. Interest Rate. As of this writing, all reverse mortgages carry adjustable rates except two, so this section will show you the interest rate index and the margin that is added to the index to get your total interest rate.  Two common indexes for reverse mortgage loans are used:  the LIBOR and the 6 Month Treasury Index.
3. Mortgage Insurance.  FHA lenders add one half of one percent (0.5%) to the interest rate for ongoing mortgage insurance.  All FHA reverse mortgage products have this added on, which effectively increases the interest rate by that amount.  The amount does not vary from lender to lender.
4. Credit Line Growth Rate.  When the reverse mortgage has a line of credit component, then this is the annual percentage by which the ceiling on the credit line will increase. This rate varies with the interest rate.  It would be as if your credit card company automatically increased your spending limit each year.
5. Interest Rate Cap is calculated by adding a given number of points to the starting interest rate.
6. Expected Interest Rate.  Represents a reasonable estimate of the average rate you will see over the long run (excluding mortgage insurance). It is calculated by adding the margin to the long-term index, such as the 10 year Treasury.
7. Monthly Fees. These are service fees that will be added to your loan balance each month to pay the servicer for record keeping, for the call center and to send you monthly statements.
8. Value of the Home. This figure is provided by you when you tell your lender the amount that you think your home is worth. This number will be adjusted by the outcome of an appraisal.
9. Lending Limit. The amount of home value that the program recognizes in calculating your principle limit and often varies by county. If your home is worth more than the limit, then the excess is ignored.
10. Service Fee Set-Aside. The total amount of the Monthly Service Fees projected into the future for the homeowner’s actuarial lifetime. It reduces the principle limit for the purpose of calculating the figures that follow, but is actually charged in the future at the monthly rate.
11. Principle Limit. Based on the age of the homeowners and is the maximum gross loan amount that this reverse mortgage program will offer.
12. Origination Fee.  The amount that the lender and/or broker is paid for their work.
13. Mortgage Insurance Premium.  When charged on for the program, this is a fee for FHA reverse mortgage insurance and is non-negotiable.
14. Other Costs.  An estimate of the total cost for title, escrow, credit check, appraisal, loan docs, notary, and other fees charged to complete your loan. For a complete breakdown, refer to the Good Faith Estimate (GFE).
15. Net Principle Limit. The actual amount of money available to the homeowner after deducting the line items above.
16. Total Liens and Debt.  Because no unpaid liens may remain on the home, this indicates the total amount to be paid off by the reverse mortgage.
17. Program is short by. If shown, then the particular program does not offer enough money to pay off the existing liens. The borrower can bring this amount to closing in order to get that program.
18. Lump Sum Cash. The lump sum amount that may be received at closing of the reverse mortgage (if requested).
19. Credit Line.  How much money is available through a credit line (if requested).
20. Monthly Advance. If requested, this is a monthly amount the lender will pay to the borrower. If “Tenure” is indicated, this amount will be paid for as long as the senior keeps the loan. “Term” indicates that the amount will be paid for a predetermined period of time.
21. Total Costs and Fees. These are usually financed in the loan and represent the sum of the Origination Fee, Mortgage Insurance Premium and Other Costs.

This information should make the reverse mortgage quote easier to understand.  Make sure that you talk to a reverse mortgage specialist to learn details for your particular circumstances.

Luke
Reverse Mortgage Pro

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I was recently asked by a Loan Officer, “Why do some credit reports contain information from accounts that belong to a completely different individual? And why is that information different than what the client sees when they order their own credit report?”

For some of you, this might be common knowledge, however, there seems to be some confusion out there on how credit reports are compiled.

First, it’s important to understand that there is a distinct difference in the way the information is compiled for a credit report ordered by a consumer versus the credit report a Loan Officer orders.

When a consumer orders their own report, the Bureaus make every effort to ensure that the person ordering the report is who they say they are (must have provide a lot of detailed information about themselves) — and that the report only contains information that directly applies to that person.

Could you imagine if you could find detailed account information for other people by simply ordering your own credit report? Or if you, as a consumer, could order someone else’s report with a partial SS# and or address?

Talk about an Identity Theft goldmine!

So, when a consumer orders a credit report, the name, SS#, address, and other identifying information must match exactly with any account info listed on that report.

When a Loan Officer orders a credit report, they or their company has signed an agreement with their provider to only use Credit Reports for permissible purposes, to abide by other restrictions, and to comply with the FCRA. Simply put, they are trusted by the Bureaus with this sensitive information and are given some flexibility in terms of the availability of that information.

They are also ordering the report to evaluate whether or not they would like to lend an individual money or extend a line of credit. The Bureaus, as a result, want to provide as much relevant information as possible to the potential lender to ensure nothing is left out of the decision process.

They certainly do not want to be held liable for excluding an important piece of information that may have changed a lender’s decision (e.g. late payment on an account that was entered with a misspelling of the individual’s name).

In an effort to provide as much information as possible, the Bureaus allow for partial matching of information. In many cases, if the SS# matches exactly, they will ignore all other information such as name, address, etc. If all but 2 of the SS#’s match, the name almost matches, and there is a regional commonality, the information will also be included.

What winds up happening is you have people with similar SS#’s and names living in the same part of the country that begin to share information on their credit reports.

Victoria Smith’s info winds up on Vickie Smith’s report… 

This can have a devastating impact on one’s credit score and ability to obtain financing in the short-term (until the inaccurate information can be corrected - which isn’t always an easy task!). 

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This time, I am in Washington, DC, another appropriate place for this week’s update (no, I don’t plan this ahead of time).  With the government’s own actions being one of the chief causes for mortgage rates climbing, we can expect more of the same on the way.

Inflation is the bigger fear these days and that is partly due to lower rates.  It is also due to the continued devaluation of the dollar and the promise to keep "creating money" to bail out Freddie Mac and Fannie Mae, all the government’s doing.  The Federal Reserve issued new rules regarding Truth in Lending (Reg. Z), and managed to harm the consumer through consumer protection, but that is another story.

Last week saw the pattern in the bond market turn extremely ugly, and fast.  The week started off nicely as I mentioned it would, with the bail out plans for Fannie and Freddie, but then reality set in.  If you remember, I stated the data was skewed due to tax rebates, and Retail Sales wreaked of that, coming in below forecasts.  That story could not overcome the PPI data, which rose at the highest year over year rate since 1981. 

Then came more confirmation that reality sucks.  The CPI report was released showing its year over year rise was the highest since 1991, coming in at 5%.  You couldn’t get around these "feelings" by hiding in the "core" reports as they were higher than expected also.  So, as inflation is letting itself be known, bonds are falling with the aerodynamics of a greased brick.

Looking to this week, more of the same can be expected unless we can quench inflationary fears.  Bonds have fallen below their lows of last October 17, so the downtrend is firmly in place.  There will likely be a correction of sorts during this week as bonds are oversold at this point.  Here is the breakdown of economic reports…

• Monday:  LEI (10:00)
• Tuesday:  Nothing
• Wednesday:  Crude Inventories (10:30), Beige Book (2:00)
• Thursday:  Initial Jobless Claims (8:30), Existing Home Sales (10:00)
• Friday:  Durable Goods Orders (8:30), Consumer Sentiment (10:00), New Home Sales (10:00)

The only "big" report is the Fed’s Beige Book, but that doesn’t mean the others will not play an increased role this week.  I haven’t looked at all of the Fed speak scheduled yet, but I imagine they will be out moving markets as well, in their attempts to calm the markets.

According to the charts, bonds are of need for a correction, or a "dead cat bounce", so there may be a brief time for floating this week, but locking will be in order for most of it.  Consumer Sentiment will likely push bonds higher as I am guessing no one "feels good" right now.  So, this week will be loaded with more action and entertainment for those of you following quotes in real time, maybe even spurring more "false" float (and lock) alerts from your sources. 

Take heed, as education is the best tool and reliance on others can prove costly.  With that in mind, I am writing a book that can help you analyze the markets better and will provide more details once I have a publishing date set up (next month?).  Until then, feel free to check out my own market analysis at Florida Mortgage Daily. 

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Mortgage Calculator has an entertaining article on some of the worst real estate investments in history. Suddenly I feel better about the last appraisal on my home.

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“Hello Lenderama readers.” Thanks for the warm welcome, Todd!  My name is Matthew Bowe and most of you probably don’t have a clue as to who I am, so, let me give you a little background on who I am and what I’ve done, and then I’d like to start a conversation.  This conversation will start with THE QUESTION that nobody wants asked.

It was just a couple of years ago that I went from full time originating to full time product design and development at the Mortgage Coach.  For me it was an opportunity to blend my technology background of 13 years with my origination experience of almost 5 years.  It was a chance to work with a company that I felt was leading the industry’s newfound sense of values by establishing the notion of  Mortgage Planning (Mortgage Coach owns the domain MortgagePlanner.com).  It was a chance to work with someone with whom I had a great deal of respect and with whom I’d built a professional friendship; Dave Savage, co-founder and CEO.

My goal in going to Mortgage Coach was to help fill in what I felt were massive gaps in the industry.  In my mind then, and in most cases still today, I felt the Consumer was the one who was being forgotten by our industry.  Mortgages were and remain confusing and overly complicated.  My determination was to deliver value and simplicity to the consumer through the loan professional.  And, I felt that, as an originator, most of the information and services I was buying were too expensive and lacked tangible value.  I wanted to put real tools and results back in the hands of the originator.  Dave Savage shared this vision and believed in my capabilities and gave me quite a long leash to create some new products (Thanks Savage!).

While at Mortgage Coach I had primary responsibility for designing and bringing to market the Marketing Machine and the Equity Optimizer (renamed the Opportunity Optimizer), two products launched within 9 mos of my starting with Mortgage Coach (that’s why I call one of my blogs “Rapid Product Success”).  I can say proudly, both were successful launches and contributed greatly to the company’s financial success.  Additionally, in the newly released Analyze, I conceived and created the specifications for Visual Loan Presenter (VLP) which takes the proposal creation capabilities found in the Marketing Machine and integrates them into the desktop software.  John Schaaf, the CIO did most of the programming and implementation and deserves credit for a good chunk of the VLP implementation.

My last effort at Mortgage Coach, which I’m especially proud of was the Seller Buydown Flyer and Analysis.  It was a pleasure to work with Scott Nicholson from BofA who pioneered this as a solution in today’s market and adapt his process.  The final result is something that is incredibly easy for the Mortgage Coach member to create and the Consumer “gets” the meaning of the numbers right away. 

Mortgage Coach has let me know that there won’t be anything for me to do there for awhile.  So, while I’ve got some free time, I will be writing about technology and looking at the world through new eyes.  But, top of my mind is starting a conversation.  This will be a conversation about your business, and about the consumer.  I want to understand what is happening on the street and in the offices of your businesses.  I want to listen to you, and I want to take part in a discussion.

Let’s explore what is going well and what is falling apart.  What problems are solvable and which are just facts of life.  Let’s reveal who is serving you and who is hurting you.  Most importantly, we’ll discuss how can we win back the consumer’s confidence, and what it is going to take to get there. What questions do clients/consumers ask you that you find difficult to answer?  What is missing from our industry in serving the consumer?

We are going to explore these questions and issues together.  Some we’ll solve, some we won’t and some we shouldn’t even consider.  Some will simply be about awareness, while others will be about actionable change.  My intention is to build some free tools to help provide bailing wire and ducktape where appropriate.  But, most importantly, let’s start talking, because I’ve got some questions for you. 

Stay tuned for Question #1 as it is the question none of the industry’s big hitters wants asked in today’s market.

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Real Estate 2.0 - the Audio Podcast
Daniel Martin and Molly Lynn

We discuss the ways Jott has made our lives and businesses SO MUCH BETTER, Molly has a major crush on Evernote, we give a shout out to some Twitter buds, and answer some user questions!

Read Daniel’s Full Bio Here
Read Molly’s Full Bio Here

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Download the MP3 Here!
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Show Notes: Running Time: 19:45

• Audio comment line: Sound off and let your voice be heard by the Real Estate 2.0 Community at +1 303-468-0570
• Please send in questions, comments, suggestions, snide remarks, kudos to iammad@madmortgageworld.com
• As always you can connect with your Host Daniel Martin via:
  • Connect via Twitter
  • Connect via Linkedin
  • Connect via Facebook
  • Connect via Email
• Connect with your co-host Molly Lynn via:
  • Follow Molly on Twitter
  • Follow Molly on Facebook
• @nyrickgrant and his blog totally Rocks!
• So does @crocks his site!
• What is Jott?
• Some really cool ways to use Jott
  • Jott to Wordpress
  • Jott to Twitter
  • Jott to Groups
  • Jott to a ton of applications!
• Molly totally crushes on her Iphone and Evernote!
• Evernote
  • Works on Mac and PC
  • It creates search-able photos
  • Great for Conferences, Meetups, etc.
  • Go To RE BLOG WORLD!
• How to get your Facebook badge - Listener Question
• How to get your Twitter badge - Listener Question
• How to use Facebook groups - Listener Question

 

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Blog World & New Media Expo hosts a weekly podcast on Blog Talk Radio. This week, Jason and I will join Jim Turner to talk all about REBlogWorld, and take live calls!

Tune in at 4:00 Eastern, 12:00 Pacific by calling

(646) 716-7047

or logging in here.

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