When Short-to-Close Isn’t a Deal-Killer

After over two years of increasing and high interest rates, nearly every reverse mortgage originator found themselves with more potential borrowers who were ‘short-to-close’. In the years before the Federal Reserve’s war on inflation, potential HECM borrowers would typically be short to close due to a higher-than-expected mortgage payoff, a significant repair set aside, or a required LESA (Lifetime Expectancy Set Aside).

Today let’s examine strategies HECM pros may employ when homeowners cannot qualify without bringing cash to the closing table.

Your CRM is a Goldmine

You’ve heard it said, “There’s gold in them thar hills”. True, if you know where to dig.?

Fortunately, mortgage professionals who have assiduously inputted every lead, loan details, and, conversation notes may be sitting on a goldmine. A goldmine of those who may qualify for a HECM if the loan’s key index, the 10-Year Constant Maturity Treasury Rate falls. The good news is that the 10-year CMT index may drop should the Federal Reserve reduce its benchmark Fed Funds rate. The chart below shows the historical correlation (not causation) between the Fed Funds Rate and the 10-Year Constant Maturity Treasury Rate.

Even better, home values have remained stable in most markets, with few exceptions. This means any gains in the HECM’s principal limit are unlikely to be eroded with a lower home value. Two HECM pros using Reverse Focus’ Sales Engine CRM reported they closed several loans in August by running an updated quote for short-to-close homeowners in the last two years.

When a short-to-close isn’t the end

If you believe that a short-to-close is a deal killer the homeowner will sense this and likely respond in kind.? After all, you’re the trusted professional. However, such a mindset is not only counterproductive but could leave homeowners unnecessarily cash flow constrained. ? Let’s say a couple is $30,000 short to close. They could get the funds from their money market account but are hesitant to part with such a tidy sum. A reverse mortgage originator who didn’t do some basic financial fact-finding wouldn’t know there was a potential source of funds to close the loan unless the homeowners volunteered the information. This is why fact-finding is essential to make an informed recommendation illustrating the power of a reverse mortgage.

In this case, the originator... [CONTINUE READING ]