Show me the Money! CRA Spiff for Reverse Mortgages?

image Last week I had dinner with a colleague who is from the forward mortgage world and has started doing some reverse mortgages over the last 6 months.  As we ate our dinner and drank our scotch and whined about the general market and economy, he blurted out that he thought there should be a Community Reinvestment Act (CRA) spiff for all the reverse mortgages that he had done.  “The only way I may money on forward mortgages in Chicago is because XYZ lender gave me an extra .75 Yield Spread because of their need to meet their CRA requirements.”

I explained that there were two ways to determine eligibility:  The first way is by subject property address AND income and the second method being the use of JUST the property address.  The first way takes into account income and a Chicago senior’s income is going to be less than the whopping $55,760 limit, so we come back to just the qualification of property address as the primary determining factor.  So if most of the reverse’s he’s done are in areas like Bronzeville, Berwyn, Hyde Park (the home of president elect Obama) and beautiful Woodlawn, are these more valuable for CRA purposes than doing something in the Gold Coast or Lincoln Park?  Are lenders getting “extra credit” for our urban adventures into those Low-to-Moderate income areas?  Should I be additionally compensated for these noble efforts or better yet a bullet proof vest?

If Cuba Gooding Jr.’s character in Jerry McGuire was a reverse mortgage originator he might say…”Some originators have coin, but I have the quan.”

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  • I used to work for Wells Fargo’s reverse mortgage division, and I’m pretty sure they’ve always taken CRA credit on these when they could. I don’t believe there’s any reason why they don’t qualify like any other loan, and I would assume that any bank involved in the RM business takes credit when they can. Why shouldn’t they? I doubt that will result in extra compensation for brokers or originators though, I don’t think the profit margins allow for it.

  • Good day,

    I agree with Larry, this is wrong in many ways. Another point, if a financial institution originates a Reverse Mortgage and does not take possession of the loan. I am saying they do not fund the loan direct and close in thier name, it does not qualify for CRA credit. This is the assumption I have always been under. If any one has proof otherwise, please let me know.

    Thanks,

    The Great American Philosopher

    http://www.thegreatamericanphilosopher.com

    Sponsored by: John A. Smaldone

  • “The first way takes into account income and a Chicago senior’s income is going to be less than the whopping $55,760 limit,”
    Does that apply to the Chicago area only?
    I have never heard of an income limit before, as I understood it, your income did not matter.

    thank you

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