How the Kosher HECM Reverse Mortgage Is Different

Feature	Kosher Reverse Mortgage	Mainstream Reverse Mortgage
Price Transparency	Yes, lenders post complete prices on this site. More	No, lenders keep their prices under wraps
Guidance on Options	Best, based on state-of-the-art calculator and guidance from disinterested experts. More	Hit or miss, seniors consult loan officers selected primarily for their sales skills
Equity Remaining	Calculator shows the best possible estimate of home equity remaining for the senior's estate. More	Not generally available.
Price Competition	Yes, seniors can select the best price on their desired HECM option from those offered by competing lenders. More	No, almost all seniors accept the prices of the one loan provider they contact.
Price Lock Protection	Yes, locked prices must be identical to current prices, which seniors can check. More	No, lenders can cheat with impunity when they lock.
Availability of Low-Cost Loans	Yes, lenders compete with regard to origination fees as well as interest rates.	Maybe, depending on the lender.
Availability of Shopping Guide	Yes, seniors who go through the kosher process end up with the data needed to shop the mainstream market.	Not a chance!
Availability of Ombudsman	Yes, the professor and his colleagues will act as ombudsmen if issues arise between the senior and the lender.	No.

Price Transparency

Lenders provide price transparency if they post their prices for anyone to see, or if they make their prices available on request, without requiring any information from those requesting it. A market in which lenders provide price transparency is one in which borrowers can shop for the best deal.

In the kosher segment of the HECM reverse mortgage market, participating lenders deliver their prices to Mortgage Professor LLC using standardized forms developed by MP to assure comparability. MP uses these prices in its HECM calculator which is designed to allow seniors to find the HECM that best meets their needs at the best price available from any participating lender.

In the mainstream (non-kosher) segment of the market, price transparency is the exception rather than the rule. Very few lenders post their prices on their web sites. The prevailing practice is to sell the concept, leaving price out of the picture. There is virtually no price shopping aside from the MP network.

Guidance on Options

HECM reverse mortgages provide a wide range of ways in which borrowers can draw funds, which poses the challenge of finding the set of options that best meets the unique needs of each borrower. In the kosher segment of the market, borrowers have access to a state-of-the-art calculator, and if they need help, they have access to option experts who have no financial interest in whether the senior closes a transaction or doesn't.

In the mainstream (non-kosher) segment of the market, the available technology is inferior, loan officers are compensated on the basis of the loans they close, and they are selected primarily for their sales skills.

Equity Remaining

In order to estimate the amount of home equity that will become available to the borrower’s estate following the borrower’s death, it is necessary to project the HECM mortgage balance and the property value over future years. The Kosher HECM calculator provides such estimates. A borrower who is concerned about the transfer of equity to heirs can access the best possible estimates in selecting from among alternative options that have different impacts on equity remaining.

The calculators available to the mainstream market do not have this capacity.

Price Competition

In the Kosher reverse mortgage market, a borrower will have access to as many as 6 lenders who have posted one or more prices for the combination of draw options selected by the borrower.

Their prices are always live and appear side by side on the screen. It is the sole source of multi-lender price comparisons.

In the mainstream market, a borrower looking to price shop must contact each of several lenders separately, must convey to each the exact set of draw options that are being priced, which has an enormous potential for error, has no way of assuring comparability when market prices are changing, and must resist the blandishments of each lender to select them because they are the best. It is not surprising that almost all borrowers contact only a single lender.

Price Lock Protection

The interest rate and origination fee on a HECM reverse mortgage are not finalized until they are locked by the lender, which typically does not happen until shortly before the loan is scheduled to close. By that time, the borrower has made a major commitment of time and money, paying out-of-pocket for an appraisal and for counseling. This makes the borrower vulnerable to an over-charge. On a Kosher HECM, the borrower can easily check the lock price against the price posted by the lender that day, but in the mainstream market that is not possible.

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