In the Fall lenders offering reverse mortgages or HECMs started funding reverse mortgages with two big differences legislated in the Bush housing bill.
First: the national loan limits were increased from as little $200,000 all the way of up to $417,000. Second: Closing costs were reduced in the form of lower lender 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%.
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.
Before the law was changed the lender could charge 2% regardless of value, up to the FHA limit.
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.
Origination fees are how lenders make money. Don't forget you have to pay all your expenses prior to actually going home at the end of the month with any money in your wallet.
Additionally, these fees are not more than typical forward mortgages. They appear to be more to the layman.
Forward mortgages use a standard 1% origination fee. The difference in forward mortgages is known as a service release premium. This is a fee the bank pays the mortgage company for selling a loan at a higher rate.
The reason the origination fee is higher for the reverse is service release premiums are very low.
As a mortgage professional I'm somewhat bewildered at AARP's views toward this subject. I wonder if they are even genuine.
I also have to wonder if AARP is asking all the insurance companys, who use AARPs name to sell insurance (of which AARP gets a commission), to take a 50% pay cut on all insurance sold.
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.
First: the national loan limits were increased from as little $200,000 all the way of up to $417,000. Second: Closing costs were reduced in the form of lower lender 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%.
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.
Before the law was changed the lender could charge 2% regardless of value, up to the FHA limit.
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.
Origination fees are how lenders make money. Don't forget you have to pay all your expenses prior to actually going home at the end of the month with any money in your wallet.
Additionally, these fees are not more than typical forward mortgages. They appear to be more to the layman.
Forward mortgages use a standard 1% origination fee. The difference in forward mortgages is known as a service release premium. This is a fee the bank pays the mortgage company for selling a loan at a higher rate.
The reason the origination fee is higher for the reverse is service release premiums are very low.
As a mortgage professional I'm somewhat bewildered at AARP's views toward this subject. I wonder if they are even genuine.
I also have to wonder if AARP is asking all the insurance companys, who use AARPs name to sell insurance (of which AARP gets a commission), to take a 50% pay cut on all insurance sold.
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.
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