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I am looking for the best reverse mortgage lender. I have felt I was being cheated in the pass from a lender, so I decided against it, because of high fees, Interest rate, insurance premium, and closing fees. Also I understand in Sept 2011 there will be, once again changes in the Reverse Mortgage. Some are saying it may close down permanently, is this true? Also, HUD & FHA are now investigating 3 of the top lenders dealing with mortgages. Will that interfere with the Reverse Mortgage changes already set? What is the interest rate that is sat at this time? I think the Reverse Mortgage Saver is a great Idea. It does help bring down the cost and fees that is being charged from some lenders. I think the reverse mortgage is a great Idea for Senior Citizens; it should be fair to all. Thank you, – Carolyn

Hi Carolyn,

You have brought up a number of issues so forgive me if this response is a bit lengthy. Firstly let’s deal with the interest rates. Rates are at an all-time low on many of the products right now, especially the fixed rates loans. However, rates are a function of the secondary market. In other words, they will go up and down depending on how much they fluctuate on the securities that are selling which are backed by the reverse mortgages.

If you compare the fixed rate mortgages at this time, you will find that there are many options available at LESS THAN 4.5% at NO ORIGINATION FEE, and rates going down to as low as 4.00% with a small origination fee (keep in mind that this is the Note rate and not the APR).

It’s amazing to me but we’ve actually had borrowers calling in lately after receiving quotes as much at three quarters of a percent higher in rate and some with origination fee above what we can do for them and then they tell me that the other lender told them that either we were going to “make it up in other fees” or other cautionary comments meant to scare the borrowers into staying with them at a higher rate.

Lending laws do not allow originators to pad any fees. Appraisals, title fees, credit, etc., all can be charged at only what those companies charge. Originators cannot by law add anything to those fees. Many borrowers look only at the fees on an adjustable rate loan. You must also look at the margin if you are looking at an adjustable rate loan as a higher margin can cost you thousands and tens of thousands of dollars in interest over the life of the loan, just as a higher interest rate can on a fixed rate loan.

A loan with “No Origination Fee” can cut thousands of dollars off the cost of your reverse mortgage. You mentioned the Saver Program and it can also save borrowers money. The Saver Program is currently available at the lowest rates since HUD first announced it and it saves borrowers greatly on the Up-Front Mortgage Insurance Premium (UFMIP). It does not give you as much money as the Standard reverse mortgage program and the rate is typically a little higher, but if you do not need as much, the Saver is a great way to reduce closing costs.

Since the UFMIP is based on 2% of the appraised value of the home to a current maximum of $625,500, the UFMIP can go as high as $12,510 on the Standard Program and is usually the single largest cost on most reverse mortgages. Compare that to the reduced UFMIP on the same property value Saver loan of just $62.55. Borrowers who can afford to take less money can save as much as $12,447.45 on the reduced cost. Add that to no origination fee, and depending on the closing costs in your area of the country, borrowers can close a reverse mortgage loan for less than $5,000 and many times less than $2,600 in the lower closing cost areas.

It is true that we are operating under a temporary increase in the HUD lending limits. The permanent limit is $417,000 and the current temporary limit is $625,500. There is quite a bit of speculation at this time as to whether the limit will revert back to the permanent level of $417,000 on October 1, 2011 when HUD begins its new fiscal year. It would take a vote of Congress to extend the current increase and with the mood in Washington, no one can say if this would happen.

If the limit did change, it would affect those properties with values over the lending limit and those borrowers would receive less under the program. Any actions taken by HUD with regard to reverse mortgage lenders should not affect any loans currently in force since those loans are already insured by HUD.

Finally, if the originator belongs to the National Reverse Mortgage Lenders Association (NRMLA), and/or the National Association of Mortgage Brokers, (NAMB) they must adhere to extremely high ethical standards (we are members of both). Our company is also listed as A+ with the Better Business Bureau. If you want to see what our customers are saying about us, please take a look at the comment cards we have posted.

Were we able to help every borrower? No, but then again, no lender is since the HUD reverse mortgage program was not meant to cover all situations and all properties. Values have dropped over the past several years and appraisals have been tough, but all lenders are fighting with these issues. We believe that Senior Borrowers should be given all the facts and then be allowed to make the decision that is in their best interest.

For that reason, we don’t use an Appraisal Management Company (AMC) that is owned in whole or part by just one lender so that borrowers are trapped if another lender can give the borrowers a better deal. This creates a conflict that prevents borrowers from being able to transfer the appraisal and some banks routinely follow this procedure, locking borrowers into loans they later cannot change. It’s a loophole in HUD’s intentions but there is currently no way to get the AMC to cooperate as they say they cannot work with anyone but the lender who placed the order (who, conveniently enough, owns them).

If you do your homework and get solid quotes before you begin and then verify the credentials of the originator and the company, you should be able to avoid that feeling of being cheated when you know you’re getting the best possible deal from the beginning.

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