AARP Still Vying to Reduce Reverse Mortgage Costs
On November 6 of 2008 reverse mortgage lenders could begin closing reverse mortgages with two important 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.
This is what the government madates under the new law. Maximum origination fees up to $200,000 of 2%. From $200,000 to $417,000 an additional max of 1%.
For example, on a $400,000 home we have $4,000 for the first 200k in value and an additional $2,000 for the remaining 200k in value. So, the total fee is $6,000.
Before the law was changed the lender could charge 2% regardless of value, up to the FHA limit.
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.
I have to wonder if AARP has any idea of what goes into mortgage origination and the complexities therein. Are they being real at all.
I also have to wonder if AARP is asking all the insurance companys, who use AARPs name to sell insurance (of which AARP gets a commission), to take a 50% pay cut on all insurance sold.
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.
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.
This is what the government madates under the new law. Maximum origination fees up to $200,000 of 2%. From $200,000 to $417,000 an additional max of 1%.
For example, on a $400,000 home we have $4,000 for the first 200k in value and an additional $2,000 for the remaining 200k in value. So, the total fee is $6,000.
Before the law was changed the lender could charge 2% regardless of value, up to the FHA limit.
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.
I have to wonder if AARP has any idea of what goes into mortgage origination and the complexities therein. Are they being real at all.
I also have to wonder if AARP is asking all the insurance companys, who use AARPs name to sell insurance (of which AARP gets a commission), to take a 50% pay cut on all insurance sold.
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
6:38 PM
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