Lenders Grumble Over HECM Fee Provision

A Federal Housing Administration reform bill would reduce origination fees on government-insured home equity conversion mortgages, and some reverse mortgage lenders don't like it.The bill (H.R. 1852) recently approved by the House Financial Services Committee keeps a 2% cap on HECM origination fees, but bases the fee on the initial principal amount of the loan. This fee structure is employed in the jumbo reverse mortgage market, but it does not provide enough compensation for lenders making lower-balance HECM loans, according to Peter Bell, president of the National Reverse Mortgage Lenders Association. In addition, the initial loan amount is determined by the age of the senior borrower and the interest rate on the loan. "It would make the origination fee smaller for a younger borrower than an older HECM borrower, which doesn't make a lot of sense," Mr. Bell said. The current 2% limit is based on the maximum claim amount. But AARP supports the committee's decision as a way to reduce borrowing costs for seniors.