Let’s see. Take an additional $81 for the borrower at close in exchange for an additional 50bps on the note rate and think that is a good deal? For whom? And then a little more glee about making more YSP on the deal? Ever looked at an amortization schedule?

I agree with the above comments. No borrower in his/her right mind would choose the HECM 150 over the HECM 100, since the additional 50bps on their interest rate would eat up the home’s equity at a considerably faster pace (just reference any reverse mortgage amortization schedule right now between these products)!!

Also, the restricted principle limit calculation on loans where the expected rate drops below 5.5% has been published for some time by HUD within Mortgagee Letter 04-18.
Notice, though, how the service set aside goes down every time the rates go up. For those with time and a curious mind, I highly recommend reading HUD Handbook 4235.1 5-7, and Appendix 21-22 regarding a mathematical explanation on how the service set-aside is calculated.

The previous posters have it right. Even with the reduction in set aside fee going to the bottom line and giving the borrower an extra $250, that sum doesn’t come close to justifying an additional 50bps over the life of the loan. Any l.o. steering his client in this direction is only in it for the money and does a disservice to our industry. I don’t even pay attention to these kinds of blips. Any such discrepancy must be evaluated within the big picture context and most importantly the best interest of the client. This is not worth mentioning. Thanks RM I have been curious as to how the service set-aside fee was calculated.