What Fees Are Allowed for an FHA Reverse Mortgage?

by Peter G. Miller
August 26th, 2007
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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.

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This entry was posted on Sunday, August 26th, 2007 at 8:30 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

2 Responses to “What Fees Are Allowed for an FHA Reverse Mortgage?”

  1. Juneboarder Says:
    August 27th, 2007 at 5:36 pm

    FHA allows a monthly servicing fee of $25-35. A max of $30 would be nice, but there are many HECM lenders out there that charge the full $35. http://search.hud.gov/search?q=cache:u4VspSqzq4cJ:www.fha.gov/reference/ml1998/98-03ml.doc+HECM+monthly+servicing+fee&access=p&output=xml_no_dtd&ie=UTF-8&client=default_frontend&site=default_collection&proxystylesheet=default_frontend&oe=ISO-8859-1

  2. Peter G. Miller Says:
    August 27th, 2007 at 6:58 pm

    Hi –

    My source is currently posted on the HUD site.

    Is it possible that older regulations have been left online?

    Do you have a URL for something newer? Or, could there be conflicting regulations?

    Thanks.