January 21, 2015
A reader asks, “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 the lender in violation of the origination cap?”
Without more information, it would be pure speculation as to whether a particular lender is in violation of FHA loan rules, but regardless, any borrower who suspects there may be illegal or unethical practices in association with an FHA home loan or HECM loan should contact the FHA directly by calling them at 1-800 CALL FHA.
Let’s see what the FHA official site (www.FHA.gov) has to say about HECM fee caps on the page FHA Reverse Mortgages (HECMs) For Seniors. Under the section “HECM Costs” we find the following:
- Mortgage Insurance Premium
You will incur a cost for FHA mortgage insurance. The mortgage insurance guarantees that you will receive expected loan advances. You can finance the mortgage insurance premium (MIP) as part of your loan. - Third-Party Charges
Closing costs from third parties can include an appraisal, title search and insurance, surveys, inspections, recording fees, mortgage taxes, credit checks, and other fees. - Origination Fee
You will pay an origination fee to compensate the lender for processing your HECM loan. A lender can charge a HECM origination fee up to $2,500 if your home is valued at less than $125,000. If your home is valued at more than $125,000 lenders can charge 2% of the first $200,000 of your home’s value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000. - Servicing Fee
Lenders or their agents provide servicing throughout the life of the HECM. Servicing includes sending you account statements, disbursing loan proceeds, and making certain that you keep up with loan requirements such as paying real estate taxes and hazard insurance premiums. Lenders may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate and $35 if the interest rate adjusts monthly. At loan origination, the lender sets aside the servicing fee and deducts the fee from your available funds. Each month the monthly servicing fee is added to your loan balance. Lenders may also choose to include the servicing fee in the mortgage interest rate.
That list is reprinted directly from the FHA official site HECM page. In our next blog post, we’ll take a look at what another government website, the Consumer Financial Protection Bureau, has to say about HECM origination fees.
Do you have questions about FHA home loans? Ask us in the comments section. All questions and comments are held for moderation.
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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