One of the biggest factors or components in a reverse mortgage that you don’t find in a regular or forward mortgage is the upfront Mortgage Insurance premium (MIP). Currently this fee is 2% of the loan amount. This cost is because a reverse mortgage is a non-recourse loan. What that means in layman’s terms is the fact that the borrower will never be responsible for owing more on the mortgage than what the home is worth at the time of sale. That is a good thing! You will only find this MIP charge on a government (FHA) or HUD loan. Other loans such as a jumbo product still contains the non-recourse coverage, but the cost to give you that insurance is rolled into the interest rate. While the closing costs are lower on a jumbo product, it will limit you on the amount you can borrower and the cost of interest onto your loan balance would be higher monthly than a government loan.

Currently another 2% will go towards the Origination Fee. This is how your loan officer and mortgage company will get paid to process, fund and close your loan package. Part of the FHA Modernization Bill about to be presented to Congress is to have the origination fee be capped at 1.5%.

About another 1% will be attributed to regular fees charged in any mortgage process. Appraisal, Credit Report, Flood Certification, Title Insurance, Courier Fees, Recording Fees, etc.

On your closing statement or HUD fee sheet, you may see other charges such as Home Owners Insurance, Property Taxes and pay offs to any current mortgage holders on the property. This will be specific to your transaction and may not be charged for all transactions.

For further information or questions please contact me at 720.641.3482 or bartonkaren@comcast.net

Reverse Mortgage Update

First and foremost, the Economic Stimulus Package has taken priority over the FHA Modernization Act in Congress. It appears the stimulus package is what the government feels will help keep the country from going into recession and thus should be put into effect quickly. The bill for the Economic Stimulus Package was signed into law on February 13, 2008. HUD has 30 days from the day the president signed the package into law to identify the impacted Metropolitan Statistical areas.

How Will the Economic Stimulus Package Affect the Reverse Mortgage?
Both FHA and Fannie Mae are saying their reverse mortgage products will not be included in the Economic Stimulus Package for loan amount increases.

Will the FHA Modernization Act Affect the Reverse Mortgage Lending Limits?
We hope so. The Act has included a loan limit increase across the board to $417,000 vs. the individual county loan limits now in place. The bill still needs to be passed by Congress before it can go into effect.

If you have any questions regarding a reverse mortgage, I can be reached at 720.641.3482 or e-mail me at bartonkaren@comcast.net.

What should happen at your reverse mortgage closing?

Before you go to closing, your Loan Officer should have given you a copy of the closing documents for the state you live in. If you did not receive this for your review, you should request them.

Another document you should receive before attending your closing is a copy of the final HUD Settlement form. This will give you the actual charges being assessed for your reverse mortgage loan. It should be close to the Good Faith Estimate you received at application. If it isn’t, this would be a good time to question your Loan Officer on the differences. You can still back away from the loan at this point if you are not comfortable with the responses to your questions or concerns about the differences in charges. You should receive this form at least 24 hours before closing.

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