In July George Bush signed the big housing bill with provisions to for two important reverse mortgage changes.
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.
A quick explanation of origination fees: The lender charges 2% of the appraisal value to 200k. For values from 200k to 417k the lender charges an additional 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.
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.
People see a forward mortgage and say, "Hey, you reverse guys sometimes charge twice that". The reason is forward mortgages build in the difference into the interest rate in what is known as a service release premium.
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.
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.
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.
A quick explanation of origination fees: The lender charges 2% of the appraisal value to 200k. For values from 200k to 417k the lender charges an additional 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.
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.
People see a forward mortgage and say, "Hey, you reverse guys sometimes charge twice that". The reason is forward mortgages build in the difference into the interest rate in what is known as a service release premium.
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.
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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