Lower HECM Origination Fees In Proposed Senate Bill

by Peter G. Miller
June 19th, 2008
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The Housing and Economic Recovery Act of 2008 proposed by Senators Chris Dodd (D-CT) and Richard Shelby (R-AL), respectively the Chairman and Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs, is now being sent to the Senate floor for consideration.

For reverse mortgage borrowers, if passed two big items in the 537-page legislation stand out.

First, the FHA loan limit would be increased to $625,000.

Second, the loan origination fee for reverse mortgages insured by HUD would be reduced from 2 percent to 1.5 percent.

While a higher FHA loan limit has value and a reduction in origination costs should be cheered, what about lowering reverse mortgage insurance premiums?

In essence, the government is telling private-sector lenders to lower their costs for FHA-insured reverse mortgages, but HECM borrowers would still face massive insurance costs.

Believing as we do that what’s good for the goose is good for the gander, what about those HUD fees? Is there any independent, non-HUD study which can say if reverse mortgage losses justify current HUD insurance premiums?

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This entry was posted on Thursday, June 19th, 2008 at 3:03 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

3 Responses to “Lower HECM Origination Fees In Proposed Senate Bill”

  1. J. R. STEVENS Says:
    June 19th, 2008 at 9:07 pm

    I have a question that my RM counselor could not answer.
    Since mortgage insurance is now tax deductible for forward mortgages, is it the same for RMs?
    Itemizing deductions has so far been a plus for me to lower the tax bite.

  2. JRB Says:
    June 20th, 2008 at 1:00 am

    Don’t get too excited about higher limits for reverse mortgages or the prospect of lower origination fees enticing fence-sitting prospects to apply now. The FHA Modernization bill will never pass. Even though the Senate version of the legislation is more conservative than the House version, the President announced today that he would veto the Senate version if it comes to his desk. And Barney Frank, who’s shepherding the House version, says the House will want more liberal bells and whistles than the Senate is offering. Bottom line: no agreement will be reached before the 4th of July recess and when Congress comes back the political season will be fully engaged and nothing will pass the rest of the year. The HECM limit will stay at $362,790 and there will be a few limited jumbo offerings available until a year from now when both houses of Congress and the White House are all controlled by the same party. Then a lot of legislation will pass. You may like what passes or you may not – but the gridlock in Washington will end.

  3. Raymond Denton Says:
    June 23rd, 2008 at 11:30 am

    >>what about lowering reverse mortgage insurance premium?

    I’ve had the same question for a while. The high premium made sense when the HECM was first introduced, because we didn’t know the long term effect of the “non-recourse” nature of the program. But now we’ve got lots of history behind us and the government has achived a hugh amount of cash from the insurance premiums. Why isn’t anybody talking about finally lowering them so they’re reasonable for homeowners? The fees are just too high for HECM’s and it doesn’t make sense for HUD to continue to charge the high premiums anymore. It boggles my mind.

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