Will The Stimulus Plan Leave HECM Borrowers Behind?
February 1st, 2008
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Remember FHA modernization? Both the House and the Senate passed modernization bills last year, but there has been no final measure between the two congressional chambers. For reverse mortgage borrowers this is a concern and a loss.
Here’s why:
Under the Senate bill, S. 2338, the origination fee for HUD-backed reverse mortgages — HECM financing in HUD-speak — would be limited to 1.5 percent of the mortgage amount.
While absent from the House bill (H.R. 3915), a cap on origination fees would mark an important advance for reverse loan borrowers in the sense that as reverse mortgages become more common — and as lenders and HUD gain experience — costs should come down unless there is statistical evidence to justify higher fees.
Both FHA modernization bills are now on the back-burner, in large measure because FHA loan limits may rise as a result of the stimulus package.
Alas, this may also mean the language concerning reverse mortgage origination fees is also gone.
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February 8th, 2008 at 4:50 pm
The highest cost in a reverse mortgage is the mortgage insurnce premium(MIP) that initially is 2% of the principal limit then is set at 0.5% per year of the outstanding loan balance. It appears that nobody is talking about lowering this cost, which seems to be siphoned off to support other government functions. I also thought I saw a statistic where only about 7% of the total collected for MIP is used to reimburse lenders where the proceeds from the sale of homes when the reverse mortgage became payble was less than the ending loan balance. I believe any insurer would be very satisfied if they only had to pay out 7% of the premiums they collect.