Reverse Mortgage Costs Still High ... AARP
In July George Bush signed the big housing bill with provisions to for two important reverse mortgage changes.
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.
This is what the government madates under the new law. Maximum origination fees up to $200,000 of 2%. From $200,000 to $417,000 an additional max of 1%.
For example, on a $400,000 home we have $4,000 for the first 200k in value and an additional $2,000 for the remaining 200k in value. So, the total fee is $6,000.
Before the law was changed the lender could charge 2% regardless of value, up to the FHA limit.
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.
This "high cost" origination fee is the only way reverse mortgage companies create revenue. To reduce it is asking them to find a new business.
Additionally, these fees are not more than typical forward mortgages. They appear to be more to the layman.
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.
Reverse mortgage companies make a small percentage of their revenue from the SRP... Many times it's less than $100. That's why the origination is higher.
As a mortgage professional I'm somewhat bewildered at AARP's views toward this subject. I wonder if they are even genuine.
There may be some hypocracy going on. I wonder if they gouge their insurance company's in same manner they wish to gouge reverse 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.
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.
This is what the government madates under the new law. Maximum origination fees up to $200,000 of 2%. From $200,000 to $417,000 an additional max of 1%.
For example, on a $400,000 home we have $4,000 for the first 200k in value and an additional $2,000 for the remaining 200k in value. So, the total fee is $6,000.
Before the law was changed the lender could charge 2% regardless of value, up to the FHA limit.
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.
This "high cost" origination fee is the only way reverse mortgage companies create revenue. To reduce it is asking them to find a new business.
Additionally, these fees are not more than typical forward mortgages. They appear to be more to the layman.
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.
Reverse mortgage companies make a small percentage of their revenue from the SRP... Many times it's less than $100. That's why the origination is higher.
As a mortgage professional I'm somewhat bewildered at AARP's views toward this subject. I wonder if they are even genuine.
There may be some hypocracy going on. I wonder if they gouge their insurance company's in same manner they wish to gouge reverse 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 Credit Counseling at
6:25 PM
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