As reverse mortgage volumes continue to slide, housing prices struggle to find a firm bottom and the possibility of further principal limit reductions (lower amounts available for seniors), reverse mortgage lenders have been forced to innovate and bring down costs to ensure interest in the FHA reverse mortgage product. In recent weeks, MetLife Bank, Wells Fargo Bank of America and other lenders have waived origination fees and other charges (servicing fees) to entice borrowers. Don’t feel sorry for the Banks though; they are making profits by packaging the loans as securities and selling them to investors. As fixed income investors look for an attractive risk-return, they will have to pay more for reverse mortgages as the supply shrinks in 2010. Until housing prices finally settle, reverse mortgage volumes may continue struggle.
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