Financial Freedom Brings HECM Fixed Rate Even Lower, No Servicing Fee

201004032047.jpgFinancial Freedom announced to correspondents on Friday that it’s rolling out the lowest fixed rate reverse mortgage product in the industry. Starting immediately, the company is offering a fixed rate HECM at 5.39% which “will save your borrowers thousands of dollars over the life of the loan” said Financial Freedom in a notice to brokers.

The new HECM fixed product includes zero servicing fees and no cap on the origination fee besides the max amount allowed by the US Department of Housing and Urban Development. “We are in an industry under close scrutiny by both regulators and the public, we wanted a program that would be most beneficial to the senior and still profitable for our broker partners,” said the company.

According to one of its account executives, the company has other product innovations in the works that will hopefully be available in the next few weeks. No word on exactly what kind of “innovations” they’re planning.

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While Financial Freedom was the top reverse mortgage wholesale lender in 2009, its volume was down 45% from 2008. Volume continues to trend downward, will the new fixed rate product help? Only time will tell.

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  • Financial Freedom needs to retract its savings statement. It is nonsense.

    The truthfulness of the statement depends on the size of the loan, its life, what interest rate it is being compared to, if they are including monthly serving fees in their comparison, and what the monthly servicing fee being charged is. In plain English this is not just puffery it seems to have crossed the threshold into false advertising.

    If a broker had another lender who had the $0 monthly servicing fee option, a $0 origination fee option, and its interest rate was 5.56% on that offering, is the FF statement correct according to the standards contained the Truth-in-Lending Act and related regulations and rulings? I thought TILA was put into place to stop this kind of phony comparisons. FF should know know than this.

    For example if one looks at a 5.39% note rate and compares it to a 5.56% note rate assuming the monthly servicing fee is $0 in both cases, on a one hundred thousand dollar beginning balance for a fixed rate rate HECM, in seven years the lower interest rate would have a balance due of $150,876.50, while the higher rate would have a balance due of 152,673.66. That difference is less than $2,000. That would seem a fair comparison.

    Maybe a company rep can explain their claim. I have always criticized those who have irrationally attacked FF and its employees. Here is a case where FF has jumped off the deep end with no reasonable basis presented for their conclusion. They need to explain themselves and their conclusions.

    • tishman,

      I am not an employee of MetLife or FF.

      On the MetLife call it was made plain that if a broker chooses the no servicing fee set aside and the “no” origination fee option, the most that the broker can charge as an origination fee is $1,200.

      It seems FF is saying that it will permit a $0 monthly servicing fee option and the broker is free to charge anything they want for the origination fee, only limited by HUD/FHA/HERA restrictions. That seems to be the meaning but then if one reads the FF irrationally exuberant savings claim above, who knows what they really mean?

      It would be helpful if a FF company rep explained their statements and claims.

      • lorihae,

        Unless borrowers live substantially beyond their life expectancy, that may not be the case at all. Remember the beginning balance on a $0 servicing fee set aside HECM is bigger than one that charges say $30 per month. For most seniors the balance due on $0 monthly servicing fee fixed rate HECM will generally be larger at the end of say 7 years. The big difference is the set aside is replaced by cash to the consumer and there is no monthly servicing fee so the servicing fee costs are saved. However, in most cases on termination the balance due will generally be larger as well as the accrued interest but that may not be so bad since the senior is getting more money upfront. It all depends….

  • tishman,rnrnI am not an employee of MetLife or FF. rnrnOn the MetLife call it was made plain that if a broker chooses the no servicing fee set aside and the “no” origination fee option, the most that the broker can charge as an origination fee is $1,200. rnrnIt seems FF is saying that it will permit a $0 monthly servicing fee option and the broker is free to charge anything they want for the origination fee, only limited by HUD/FHA/HERA restrictions. That seems to be the meaning but then if one reads the FF irrationally exuberant savings claim above, who knows what they really mean? rnrnIt would be helpful if a FF company rep explained their statements and claims.

  • MetLife is offering 0 Origination and 0 servicing fee. That will amortize to a much greater savings to the borrower than FF is pronouncing.

  • lorihae,rnrnUnless borrowers live substantially beyond their life expectancy, that may not be the case at all. Remember the beginning balance on a $0 servicing fee set aside HECM is bigger than one that charges say $30 per month. For most seniors the balance due on $0 monthly servicing fee fixed rate HECM will generally be larger at the end of say 7 years. The big difference is the set aside is replaced by cash to the consumer and there is no monthly servicing fee so the servicing fee costs are saved. However, in most cases on termination the balance due will generally be larger as well as the accrued interest but that may not be so bad since the senior is getting more money upfront. It all depends….

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