Security One started offering Fixed-Rate Reverse Mortgages with no Servicing Fees, and now everyone is jumping on the bandwagon

First a quick explanation of what a servicing fee is and how it affects Reverse Mortgage loans.

Reverse Mortgages do not require the borrower to make monthly payments so until now, at closing, there was a Servicing Fee Set Aside (SFSA) that was taken out of the available proceeds. This was about ten years of monthly servicing fees (depending on age and about $35 per month) for a total of about $4,000 to $5,000.

This money was just "set aside." It was not an actual fee so if the loan was paid off in a year, only the twelve months (12 X $35 = $420) would get taken and the rest would be refunded.

However, it did reduce the amount that borrowers could use and it was always a source of confusion.

Now, Security One announced that they will do away with it and Bank of America and Genworth have announced the same. I think it is great. In light of the recent 10% cut to loan amounts, any increase that we can give to people who genuinely need it is welcome.