On November 6 of 2008 reverse mortgage lenders could begin closing reverse mortgages with two important changes:
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%.
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 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.
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.
The reason the origination fee is higher for the reverse is service release premiums are very low.
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?
I doubt it. Money talks. Do you know AARP makes more money selling insurance than it does membership fees.
AARP is a useful informative of company, but they are off the mark this time.
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%.
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 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.
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.
The reason the origination fee is higher for the reverse is service release premiums are very low.
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?
I doubt it. Money talks. Do you know AARP makes more money selling insurance than it does membership fees.
AARP is a useful informative of company, but they are off the mark this time.
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