In July George Bush signed the big housing bill with provisions to for two important reverse mortgage 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%.
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.
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.
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.
Is it possible that AARP is just putting on a good face to keep up appearances for their senior contituency?
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?
Of course not. AARP is far too busy making a killing on all those policies sold through their marketing efforts.
This is an area AARP should simply stay out of. - 15224
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%.
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.
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.
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.
Is it possible that AARP is just putting on a good face to keep up appearances for their senior contituency?
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?
Of course not. AARP is far too busy making a killing on all those policies sold through their marketing efforts.
This is an area AARP should simply stay out of. - 15224
