Lower Costs – a positive:
Driven by an increase in demand for Ginne Mae securities backed by the loans, investors are willing to pay a premium to Lenders because of the attractive yield from the loans. Lenders have been passing that premium to borrowers by reducing the upfront costs of the loans. This often takes the form of reduced origination fees, reduced or eliminated servicing fees, some lender are even willing to reduce or eliminate altogether the Mortgage Insurance Premium fees upfront. When Lenders compete…the consumer wins. While lowering costs increases the available proceeds, lower costs also bring a new challenge to consumers, comparing the offers to find the best one.
Why You Should Use a Broker – a positive:
The reduction of the upfront costs of a Reverse Mortgage has been great news for borrowers; however the recent fee reductions mean more work for prospective borrowers to compare loans from multiple lenders. One lender might reduce the origination fee, while another might waive the origination fee but raise the interest rate. Another could change the servicing fee. This is where an experienced Reverse Mortgage Broker comes into play.
Brokers who work with multiple Lenders can get the full details of each product and analyze and compare them for you. Some brokers have a thorough knowledge of the Lenders and products available in the market today. Most consumers aren’t as familiar with Reverse Mortgages as they are with Conventional Mortgages; more reason to seek out an experienced Broker to help you find the best product that suits your needs. With a wide range of products and providers, it can be difficult for consumers to determine if their company is providing information on the full menu of product options available. Consumers need to be selective and they should work with providers who have an established history and a thorough understanding of reverse mortgages, as well as the unique needs of seniors. Stay In-Home Reverse Mortgage is aligned to offer you products from the majority of competent lenders nationally. Your Senior Home Advisor is knowledgeable in the whole range of HECM pricing options. Generally speaking, banks can only offer their own products and that limits your options.
2. Principal Limit Reduction – a big negative:
On October 1st, 2009 HUD implemented a 10% reduction in principal limits for its Federal Housing Administration (FHA) insured reverse mortgage product, the first ever reduction. The 10 percent reduction in principal limit factors has had a major impact on the number of seniors who have access to the product.
3. Increase in the Mortgage Insurance Premium (MIP) from .5 to 1.25% – a negative:
What this means to homeowners that get their Reverse Mortgage after this change is an overall increase in the cost of the loan. Instead of a .5% fee, a fee of 1.25% will be added to the loan balance annually.
4. Reverse Mortgage Appropriation - a negative if it doesn’t pass and a positive if it does:
Included in the Obama Administration’s FY 2011 budget is a $250 million appropriation request to offset projected losses for the Federal Housing Administration’s reverse mortgage program. The request is in addition to lowering the principal limits one to five percent depending on the age of the borrower and increasing the annual mortgage insurance premium from 0.50% to 1.25%.
If congress does not provide the $250 million, FHA will be forced to reduce the amount of money available to seniors through the program by 21% according to testimony from Commissioner David Stevens earlier this year. During the testimony, Stevens urged members of Congress to provide the appropriation because seniors have been hit hard during the financial crisis due to increasing medical costs and less savings in various types of pension funds and retirement accounts. ”The need for this type of program is greater now than it’s ever been,” he said.
5. FHA Lending Limits – negative
After seeing the maximum available limits increase in 2008 and then again in 2009 to $417,000.00, the latest increase to $625,500.00 signed into law by President Obama is only temporary through the balance of this year. Homeowners with homes valued between $417,000.00 and $625,000.00 would lose significant proceeds if the $625,000.00 limit goes away. Lock in now or risk the chance of that increase going away.
If you are considering a Reverse Mortgage the time to move forward is now as the cost of waiting may be substantial. Please call us @ 1-800-963-8011 to speak to one of our Senior Home Advisors.
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