AARP.. Law Didn't go Far Enough to Reduce Reverse Mortgage Costs
In the Fall lenders offering reverse mortgages or HECMs started funding reverse mortgages with two big differences legislated in the Bush housing bill.
The one most people were concerned about was FHA increasing its its national loan limits up to four hundred seventeen thousand dollars. The other, less known change, was a reduction in lender 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%.
To give you a scenario we'll assume the home is worth $350,000. The fee for the initial $200k is $4,000. Add in an extra $1,500 for the value between 200 to 350 and you arrive at a total fee of $5,500.
A 2% across the board origination fee was the order of the day prior to the the new law.
What concerns me is why the lender is getting the proverbial finger pointed at it. I mean how low can the origination fee be before the lender goes bellie up.
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.
I have to wonder if AARP has any idea of what goes into mortgage origination and the complexities therein. Are they being real at all.
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?
Oh, don't think so. Insurance commission is the number one money maker for AARP. It's a money train.
AARP is not so pure and they should to sit this one out.
The one most people were concerned about was FHA increasing its its national loan limits up to four hundred seventeen thousand dollars. The other, less known change, was a reduction in lender 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%.
To give you a scenario we'll assume the home is worth $350,000. The fee for the initial $200k is $4,000. Add in an extra $1,500 for the value between 200 to 350 and you arrive at a total fee of $5,500.
A 2% across the board origination fee was the order of the day prior to the the new law.
What concerns me is why the lender is getting the proverbial finger pointed at it. I mean how low can the origination fee be before the lender goes bellie up.
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.
I have to wonder if AARP has any idea of what goes into mortgage origination and the complexities therein. Are they being real at all.
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?
Oh, don't think so. Insurance commission is the number one money maker for AARP. It's a money train.
AARP is not so pure and they should to sit this one out.
posted by Debt Consolidation Loan at
6:33 PM
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