Over the weekend the Wall Street Journal published that with lower costs, reverse mortgages are looking better. WSJ columnist Amy Hoak writes that the lower costs also bring a new challenge to consumers, comparing the offers to find the best one.
“Quite a few of the lenders now have reduced the origination fees,” says Barbara Stucki, vice president of home-equity initiatives for the National Council on Aging. “Some of them are getting rid of the origination fees. Some are willing to pay some of the mortgage-insurance premium fees upfront.”
It’s an important development for reverse mortgages, which have in the past faced criticism for charging high upfront costs, says Peter Bell, president of the National Reverse Mortgage Lenders Association.
Driven by an increase in demand for Ginne Mae securities backed by the loans, investors are willing to pay a premium because of the attractive yield from the loans according to the WSJ. Lenders have been passing that premium to borrowers by reducing the upfront costs of the loans.
However, the recent fee reductions mean more work for prospective borrowers to compare loans from multiple lenders. One lender might reduce the origination fee, while another might waive the origination fee but raise the interest rate. Another could change the servicing fee said Bell.
“Consumers need to get the full details of the offer from the lender, and [they] need to analyze them and compare them,” he says.