In the Fall lenders offering reverse mortgages or HECMs started funding reverse mortgages with two big differences legislated in the Bush housing bill.
Most mortgage professionals were clamoring for the first big change and that was to increase lending limits up to 417k. The other change, lenders wish was not included, was the reduction of origination fees.
Here is how it works; the origination fee is two percent of the value of the home up to $200,000. For values above 200k and up to 417k the fee increases by 1%.
Let's use a $300,000 valued house. The orgination fee for th first $200,000 will be as much as $4,000. For the additional $100,000 in value it can be as much as $1,000. The maximum origination is $5,000.
Prior to the new legislation going into affect a mortgage company could charge two percent up to FHA lending limits.
What does AARP really expect of the lender? Should the lender price itself to point where the owner should take a second job? It sounds like it.
These fees pay processors, loan officers, marketing, office rent, and then finally go into the owner's pocket in the form of profit.
What's more this lender fee is no more expensive for reverse mortgages than it is with forward mortgages. Forward mortgages simply hide the difference in the form of a higher rate.
How a forward mortgage ends up costing the borrower as much as a reverse mortgage is in the "service release premium". This is is a fee the bank pays the mortgage company inside the rate. They may charge 1% but there is backend money in those loans.
Although reverse mortgages have SRPs they are very small, which is why the higher origination fee must be charged.
As a mortgage professional I'm somewhat bewildered at AARP's views toward this subject. I wonder if they are even genuine.
Afterall, they do have a growing senior population to sell insurance to. Do they ask their client insurance companies to take a hit like they mortgage companies?
I doubt it. Money talks. Do you know AARP makes more money selling insurance than it does membership fees.
This is an area AARP should simply stay out of.
Most mortgage professionals were clamoring for the first big change and that was to increase lending limits up to 417k. The other change, lenders wish was not included, was the reduction of origination fees.
Here is how it works; the origination fee is two percent of the value of the home up to $200,000. For values above 200k and up to 417k the fee increases by 1%.
Let's use a $300,000 valued house. The orgination fee for th first $200,000 will be as much as $4,000. For the additional $100,000 in value it can be as much as $1,000. The maximum origination is $5,000.
Prior to the new legislation going into affect a mortgage company could charge two percent up to FHA lending limits.
What does AARP really expect of the lender? Should the lender price itself to point where the owner should take a second job? It sounds like it.
These fees pay processors, loan officers, marketing, office rent, and then finally go into the owner's pocket in the form of profit.
What's more this lender fee is no more expensive for reverse mortgages than it is with forward mortgages. Forward mortgages simply hide the difference in the form of a higher rate.
How a forward mortgage ends up costing the borrower as much as a reverse mortgage is in the "service release premium". This is is a fee the bank pays the mortgage company inside the rate. They may charge 1% but there is backend money in those loans.
Although reverse mortgages have SRPs they are very small, which is why the higher origination fee must be charged.
As a mortgage professional I'm somewhat bewildered at AARP's views toward this subject. I wonder if they are even genuine.
Afterall, they do have a growing senior population to sell insurance to. Do they ask their client insurance companies to take a hit like they mortgage companies?
I doubt it. Money talks. Do you know AARP makes more money selling insurance than it does membership fees.
This is an area AARP should simply stay out of.
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