January 21, 2015
In our previous blog post, a reader asked us an important question about FHA Home Equity Conversion Mortgage (HECM) loan origination fees. Here’s that question:
“Is there a cap on fees a broker can be compensated for their part on a HECM loan, and if the lender list origination fee that is clearly greater than the $6000 max, which includes the broker compensation paid by the lender. My question is is the lender in violation of the origination cap?”
FHA HECM loan origination fees are indeed capped at a maximum of $6,000 for certain HECM loans above a specific dollar amount. The Consumer Financial Protection Bureau, a government finance watchdog organization, has this to say about FHA HECM loan origination fees:
“An origination fee is what the lender or mortgage broker charges the borrower for making the HECM reverse mortgage loan. Lenders may charge an origination fee of up to $6,000 for these loans. For homes worth less than $400,000, the maximum origination fee for these loans is calculated on a sliding scale between $2,500 and $6,000, depending on the value of the home. For homes worth more than $400,000, the maximum origination fee for these loans is $6,000.”
Furthermore:
“An origination fee is what the lender and any mortgage broker charges the borrower for making the mortgage loan. Origination services include taking and processing your loan application, underwriting and funding the loan, and other administrative services. Origination charges are listed in Block 1 on your Good Faith Estimate (GFE) (and Line 801 of your settlement statement), and generally cannot increase at settlement of your mortgage loan.”
One thing that is important to note is the difference between an FHA HECM loan and what is known as a proprietary reverse mortgage–this is a loan that is NOT insured by the FHA and, according to the CFPB official site, may have different costs. Be sure you know the difference between an FHA and a non-FHA reverse mortgage before applying.
Do you have questions about FHA mortgages? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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