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%.
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.
Prior to the new legislation going into affect a mortgage company could charge two percent up to FHA lending limits.
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.
These fees pay processors, loan officers, marketing, office rent, and then finally go into the owner's pocket in the form of profit.
What's more this lender fee is no more expensive for reverse mortgages than it is with forward mortgages. Forward mortgages simply hide the difference in the form of a higher rate.
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.
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.
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 not so pure and they should to sit this one out. - 16928
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%.
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.
Prior to the new legislation going into affect a mortgage company could charge two percent up to FHA lending limits.
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.
These fees pay processors, loan officers, marketing, office rent, and then finally go into the owner's pocket in the form of profit.
What's more this lender fee is no more expensive for reverse mortgages than it is with forward mortgages. Forward mortgages simply hide the difference in the form of a higher rate.
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.
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.
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 not so pure and they should to sit this one out. - 16928
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