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.
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.
The question is what would AARP like to do here? Can a lender charge less and still stay in business. Lenders are not non-profits.
This "high cost" origination fee is the only way reverse mortgage companies create revenue. To reduce it is asking them to find a new business.
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.
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.
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 a useful informative of company, but they are off the mark this time. - 20896
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.
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.
The question is what would AARP like to do here? Can a lender charge less and still stay in business. Lenders are not non-profits.
This "high cost" origination fee is the only way reverse mortgage companies create revenue. To reduce it is asking them to find a new business.
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.
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.
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 a useful informative of company, but they are off the mark this time. - 20896
No comments:
Post a Comment