Origination Caps in Final FHA Reform Package
July 30th, 2008
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Like the last two minutes in basketball, changes continue to flow back and forth on Capitol Hill as various versions of the FHA reform package are passed.
Thomas, the electronic information service operated by the Library of Congress, has now posted the final version of the FHA reform package and — once more — we have changes related to reverse mortgages.
In the enrolled version of the legislation, the one being sent to the President — we are back to caps on reverse mortgage origination fees.
The new fee schedule will allow origination fees equal to 2 percent of the first $200,000 of the maximum claim amount, 1 percent of every thing above with a $6,000 cap per transaction.
The actual language in the bill says the following:
(c) LIMITATIONON ORIGINATION FEES.—Section 255 of the National Housing Act (12 U.S.C. 1715z–20), as amended by the preceding provisions of this section, is further amended by adding at the end the following new subsection:
“(r) LIMITATIONON ORIGINATION FEES.—The Secretary shall establish limits on the origination fee that may be charged to a mortgagor under a mortgage insured under this section, which limitations shall—
“(1) be equal to 2.0 percent of the maximum claim amount of the mortgage, up to a maximum claim amount of $200,000 plus 1 percent of any portion of the maximum claim amount that is greater than $200,000, unless adjusted thereafter on the basis of an analysis of—
“(A) the costs to mortgagors; and
“(B) the impact on the reverse mortgage market;
“(2) be subject to a minimum allowable amount;
“(3) provide that the origination fee may be fully financed with the mortgage;
“(4) include any fees paid to correspondent mortgagees approved by the Secretary;
“(5) have the same effective date as subsection (m)(2) regarding the limitation on principal obligation; and
“(6) be subject to a maximum origination fee of $6,000, except that such maximum limit shall be adjusted in accordance with the annual percentage increase in the Consumer Price Index of the Bureau of Labor Statistics of the Department of Labor in increments of $500 only when the percentage increase in such index, when applied to the maximum origination fee, produces dollar increases that exceed $500.”
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