Senior homeowners looking to shop the HECM reverse mortgage
market for the best price, meaning the lowest interest rate
and origination fee, have a major problem. Unlike the
standard mortgage market, where price data are available
from many sources, including third party multi-lender sites,
in the reverse mortgage market prices are hard to find.
Only a few individual lenders have web sites containing
complete and up-to-date reverse mortgage prices. One of the
best of the few that do is All Reverse Mortgage Company.
There is one multi-lender site that
allows users to compare the prices of different lenders:
which is mine. The reverse mortgage calculator on my site
identifies the best prices posted by All Reverse, Proficio
Mortgage and Barrons Mortgage Group; several more lenders
will soon be joining. Note that I have no financial interest
in any of these firms, and do not charge borrowers or
There is one other source of reverse mortgage price data,
however, that seniors may be unfortunate enough to
prices are embedded in the web-based calculator provided by
NRMLA, which is the trade association of reverse mortgage
lenders, at www.reversemortgages.org. The prices are
described as “estimates”, but the method of estimation is
not explained and no individual lenders are identified.
Here is an example. On April 17, a senior of 75 with a
$200,000 existing mortgage balance on a home worth $500,000
would have found the following prices on a HECM fixed-rate
reverse mortgage. On the NRMLA site, the rate was 5.060% and
the origination fee $6,000. On my site, the rate was 4.25%
and the origination fee was minus $2015 – the lender would
pay a rebate that would be credited against the mortgage
insurance premium or other settlement costs.
These large price differences are not due to any
differences in investor risk, since all HECMs are insured
against loss by FHA. There is no prime versus sub-prime
Neither are the price differences due to differences in
price integrity – the degree of confidence a borrower can
have that the market price changes that occur while the loan
is in process won’t be used to justify a price increase on
the day the price is locked.
On the contrary, the price quotes on my site have
complete integrity because the lenders are identified by
name and the borrower can verify that the price at which the
loan is finally locked is the same price the lender is
quoting on an identical transaction on that day. The NRMLA
quotes have zero integrity because there is no identifiable
lender behind them.
Reverse mortgage originators make a profit on sale of the
mortgage, the size of which depends on the size of the
initial loan amount. If that profit is sufficiently large, a
competitive lender will provide a negative origination fee
or rebate that covers the upfront mortgage insurance premium
and all other settlement costs: the result is a no-closing
cost reverse mortgage.
If the profit on sale isn’t large enough to cover all the costs, it may be large enough to justify a rebate that will cover some of the costs. This would result in a “low-closing cost reverse mortgage”. Currently, more than half of all the transactions done by All Reverse qualify for no-closing cost or low-closing cost treatment.
But don’t look for either on the NRLMA site. The NRMLA
calculator assumes that lenders always charge the highest
origination fee allowed by law, which means that no-closing
cost and low-closing cost reverse mortgages are not
available from lenders who follow NRMLA pricing.
Shopping Implications For Seniors
The good news is that such loans are available from lenders who don’t follow NRMLA pricing. This includes the lenders who post prices here, but there are others as well. If you are attracted by a solicitation or an advertisement, you can check their price against those posted here.