Several reverse mortgage lenders have announced the elimination of the $30 monthly servicing fee on their FIXED rate HECM product.  The result will be $3,500 to $5,000 more money available to an average borrower should they decide to place their FIXED rate HECM loan with these particular lenders.  No change has been announced to the more popular ADJUSTABLE rate HECM products, however.

Some in the industry are suggesting that this is merely a short term aberration and that the servicing fee will probably return once interest rates start to rise again.  Others have hailed the announcement as a small but positive step toward countering some of the devistating principal limit loss of October, 2009 when borrowers saw 10% shaved by HUD from the amount of their benefit.

More Principal Limit Cuts in 2010?

As of this moment, this may be the best environment borrowers can hope to see in 2010.  HUD has already announced the likelihood of another 5% cut to the principal limit before fiscal year end in October, 2010.  And, recent reports predict a principal limit cut as high as 20% if HUD fails to get approval of its budget request for $250,000,000 to subsidize the program.  Either of these increased cuts will cause more seniors to become ineligible for the federally insured reverse mortgage program.  The government continues to work overtime to destroy what was once a very beneficial loan program.

If you are dealing with a captive loan originator working for a single lender (e.g. a bank), you could easily miss out on this opportunity if that lender does not offer the no service fee policy.  Same story if you elect to place your loan with a telemarketer.  Best bet for most seniors continues to be to find an experienced reverse mortgage broker with connections to multiple lenders. Odds are good that you will find the best opportunities where there are multiple options… and where your loan officer is not beholden to a single source.  That’s the way the business works and you obviously benefit from diversity in this case.

Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant

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