After a year where loan amounts were cut by 10% and more cuts have been proposed (threatened) by the Department of Housing and Development (HUD) things lately have been getting better for Reverse Mortgage borrowers for the first time.
The Servicing Fee Set Aside, a difficult-to-explain amount that used to get withheld from the amount that borrowers could use, has been eliminated by all lenders for fixed-rate reverse mortgages. This gives an additional $2,000-$5,000 to many borrowers.
The adjustable-rate borrowers are still stuck with it. The reason for this is that secondary market execution (the amount that the lenders get when they sell the loan) has improved for fixed-rate reverse loans lately.What is scary is that this can change at any moment and we are marketing and promising borrowers things that are legitimate today, but can be pulled back tomorrow.
Some lenders are even reducing or eliminating the origination fees because of the increased payout on the "back end" for fixed-rate reverse mortgages. This is also dangerous for the above mentioned reasons, also, because the adjustable-rate reverse mortgages enjoy none of these benefits, it can get confusing for borrowers.
Hopefully, more improvements to the product and more proceeds to the borrowers will be a continuing trend.
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