On November 6 of 2008 reverse mortgage lenders could begin closing reverse mortgages with two important 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.
A 2% across the board origination fee was the order of the day prior to the the new law.
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.
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.
Although reverse mortgages have SRPs they are very small, which is why the higher origination fee must be charged.
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.
Oh, don't think so. Insurance commission is the number one money maker for AARP. It's a money train.
This is an area AARP should simply stay out of. - 20897
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.
A 2% across the board origination fee was the order of the day prior to the the new law.
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.
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.
Although reverse mortgages have SRPs they are very small, which is why the higher origination fee must be charged.
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.
Oh, don't think so. Insurance commission is the number one money maker for AARP. It's a money train.
This is an area AARP should simply stay out of. - 20897
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