AARP.. Law Didn't go Far Enough to Reduce Reverse Mortgage Costs
In the Fall lenders offering reverse mortgages or HECMs started funding reverse mortgages with two big differences legislated in the Bush housing bill.
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.
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%.
Let's use a $300,000 valued house. The orgination fee for th first $200,000 will be as much as $4,000. For the additional $100,000 in value it can be as much as $1,000. The maximum origination is $5,000.
Before the law was changed the lender could charge 2% regardless of value, up to the FHA limit.
What does AARP really expect of the lender? Should the lender price itself to point where the owner should take a second job? It sounds like it.
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.
Forward mortgages use a standard 1% origination fee. The difference in forward mortgages is known as a service release premium. This is a fee the bank pays the mortgage company for selling a loan at a higher rate.
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.
Is it possible that AARP is just putting on a good face to keep up appearances for their senior contituency?
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.
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%.
Let's use a $300,000 valued house. The orgination fee for th first $200,000 will be as much as $4,000. For the additional $100,000 in value it can be as much as $1,000. The maximum origination is $5,000.
Before the law was changed the lender could charge 2% regardless of value, up to the FHA limit.
What does AARP really expect of the lender? Should the lender price itself to point where the owner should take a second job? It sounds like it.
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.
Forward mortgages use a standard 1% origination fee. The difference in forward mortgages is known as a service release premium. This is a fee the bank pays the mortgage company for selling a loan at a higher rate.
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.
Is it possible that AARP is just putting on a good face to keep up appearances for their senior contituency?
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 Debt Consolidation Loan at
7:04 PM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home