Posted by Jason on 10/28/06 2:42pm
Msg #155820

Ever see a fixed rate Reverse Mortgage?

All I see are adjustables.

Is there some sort of rule about mandatory adjustable rates?

Are the lenders borrowing the $ @ a fixed rate then turning around and loaning to brwrs @ adjustable rates?

THX

Reply by Jersey_Boy on 10/28/06 3:08pm
Msg #155825

This is just my guess... so keep that in mind.

Like a credit card or a home equity line of credit, the reverse mortgage has a fluctuating principal balance. Each month, when the borrower gets their check, the principal balance of the loan inflates. Since the borrower is contstantly adding more and more principal to the balance of the loan, it's difficult to give the borrower a fixed rate. Imagine getting a fixed rate on your home eq. line. Imagine getting a Credit Card that has a fixed rate for the life of your account. This would be great for you, but not practical for the lending company.

Again, this is just my guess. If I am wrong, please correct me.

Reply by Jason on 10/28/06 4:54pm
Msg #155837

You're right if bwrs are getting monthly pymts.

But if they only take out 1 lump sum at closing, that logic doesn't have to apply.

I think the lenders who issue arm's on the lump sums are just doing so to make more $.

Reply by Jason on 10/28/06 5:02pm
Msg #155841

Jerz - and....

Another thought
You can get a credit card w/ a fixed rate. Why not a RevMort?

I think all the lenders have everybody thinking it can't happen when it can. They just don't want to.

Reply by PAW on 10/28/06 3:29pm
Msg #155828

Adjustable Rate mandated by HUD

The HUD Handbook 4325.1 with REV-1 allows for both fixed and adjustable rate notes in HECM loans. ARMs are probably used because they are better for the lender to keep pace with the economy.

From the handbook:

----------------------------

6-6PREPARATION OF SECURITY INSTRUMENTS. The lender must prepare the following legal instruments (see appendices at the end of this Handbook for mandatory model forms), as needed for a particular case:

A. Mortgage and note. The lender must provide a copy of the first mortgage and the appropriate first note (fixed or adjustable rate) for review by the borrower during the application process (see Paragraph 4-7), but not later than when the borrower signs the URLA.

----------------------------

I don't remember ever seeing a fixed rate HECM.

Reply by PAW on 10/28/06 3:29pm
Msg #155829

s/b: Adjustable Rate NOT mandated by HUD n/m

Reply by Jason on 10/28/06 4:57pm
Msg #155839

THX PAW

I was hoping you would see the post + answer.

I think my broker is being led by the nose by a lender. You just proved that right.

Any ideas on how to find a lender giving fixed rate HECMs? So much better for bwrs.

THX ! ! !