What The New Law Says
August 10th, 2008
- New Origination Fee Proposed In Senate FHA Reform Measure
- Reverse Mortgage Origination Fees & “Suitability”
- Lower HECM Origination Fees In Proposed Senate Bill
- Will Reverse Mortgage Costs Fall?
- HUD to Congress: Keep Reverse Loan Costs High
Michelle Singletary, the excellent personal finance columnist with The Washington Post, took a look at reverse mortgages over the weekend and had some interesting points about the new regulations that will go into effect October 1st.
“Under the new law,” says Singletary, “the amount a senior can borrow through a reverse mortgage has been increased to $417,000 nationally. However, that limit could be pushed to $625,000 if the borrower lives in a high housing-cost area. Currently, the amount a senior can borrow varies by county. The range now is $200,160 to $362,790.”
She adds that “the law reduces fees on this type of loan. It cuts the origination fee to 2 percent of the first $200,000 borrowed and 1 percent for any amount after that. The maximum origination fee can’t exceed $6,000. The fee is currently capped at 2 percent of the loan limit or of the home’s value. The law does allow for the cap to adjust, based on the annual percentage increase in the consumer price index.”
Interestingly, she does not ask why HUD insurance premiums remain unchanged but does note that the new law requires a study of reverse mortgage costs.
“Except for title, hazard, flood or other such insurance products,” she explains, “lenders are prohibited from requiring borrowers to purchase insurance, annuities or other similar products as a condition for a reverse mortgage. The law also restricts lenders who are originating reverse mortgages from working with, employing or providing incentives to other professionals trying to sell seniors other financial products as part of the application process.
“The housing act includes a provision for reverse mortgages partly because of concerns that seniors were inappropriately — and sometimes fraudulently — being sold other financial products.”
For the full story, please see: Help for Seniors Who Have Reverse Mortgages