Due to significant swings in the secondary market for reverse mortgages, Bank of America said is pulling their 4.99% fixed rate HECM product on Friday.
Wholesalers across the reverse mortgage industry pulled back on pricing during the week due to an extremely volatile bond market.
“Everyone is watching very carefully right now,” said David Fontanilla, Trader at Knight Capital Group during an interview with RMD last week. The mortgage market is being affected across the board, but Fontanilla said reverse mortgages have outperformed so far. “They have not taken as much of a price hit as some of the other bonds out there,” he said.
Last week, the average 30 year fixed rate mortgage hit a six month high of 5.09% according to data provider HSH Associates. While a Freddie Mac survey showed rates averaged 4.83% for the week ending Thursday, up from a record low 4.17% just one month ago.
The 10 year Treasury – which directly affects mortgage rates- has seen a significant jump in the past month, it closed at 3.3%, up from its October low of 2.382%.
While moving from a 4.99% to 5.09% for the fixed rate product doesn’t impact the principal limit for borrowers, if rates continue to increase, the industry will loose any additional proceeds from the Department of Housing and Urban Development’s decision to lower the rate floor.