AARP Still Vying 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.
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.
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%.
Let's use a $300,000 valued house. The orgination fee for th first $200,000 will be as much as $4,000. For the additional $100,000 in value it can be as much as $1,000. The maximum origination is $5,000.
Prior to the new legislation going into affect a mortgage company could charge two percent up to FHA lending limits.
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.
Furthermore, traditional mortgage origination fees are no less expensive if you examine them closely.
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.
Is it possible that AARP is just putting on a good face to keep up appearances for their senior contituency?
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.
Of course not. AARP is far too busy making a killing on all those policies sold through their marketing efforts.
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.
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%.
Let's use a $300,000 valued house. The orgination fee for th first $200,000 will be as much as $4,000. For the additional $100,000 in value it can be as much as $1,000. The maximum origination is $5,000.
Prior to the new legislation going into affect a mortgage company could charge two percent up to FHA lending limits.
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.
Furthermore, traditional mortgage origination fees are no less expensive if you examine them closely.
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.
Is it possible that AARP is just putting on a good face to keep up appearances for their senior contituency?
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.
Of course not. AARP is far too busy making a killing on all those policies sold through their marketing efforts.
AARP is not so pure and they should to sit this one out.
posted by Credit Counseling at
6:35 PM
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