What Fees Are Allowed for an FHA Reverse Mortgage?
August 26th, 2007
- Fixed-Rate Reverse Mortgages Give Seniors More Choices
- Unlike Unicorns, Fixed-Rate Reverse Mortgages Do Exist
- Reverse Mortgage Lenders Waive Some Fees
- HUD To Seniors: Avoid Fixed Rates (Cue Scary Music….)
- On The Trail of DPLs
How much can a reverse lender charge for servicing a loan under the FHA HECM program?
The answer is not more than $30 a month — but only if the reverse loan has a fixed interest rate. If the interest rate is adjustable then there is no cap.
If you think about it, $30 a month is a bunch of money — $360 a year, $1,800 over five years.
Here’s what the HUD guidelines actually say:
The lender is permitted to charge the borrower a servicing fee if this cost has not already been priced into the borrower’s mortgage interest rate.
A. If the lender chooses to assess a servicing fee, the fee is established at closing as a monthly figure and the amount necessary to pay this fee throughout the life of the loan is
calculated and set aside from the principal limit at closing (see Paragraph 5-7B. for calculations).
B. The servicing fee that may be charged on fixed rate or annually adjustable loans may not exceed thirty dollars ($30.00) per month. The servicing fee that may be charged on monthly adjustable loans is uncapped.
C. The lender adds this fee to the borrower’s outstanding balance monthly, and cannot assess any other fees to cover the costs of servicing.