Over the weekend, the Wall Street Journal published another article about reverse mortgages in its Encore section of the paper. WSJ journalist Anne Tergesen writes about the changes in the program and what we can expect once the new provisions become active.
"We’ll see a surge of applications," says Peter Bell, president of the National Reverse Mortgage Lenders Association. The new law which was passed over the summer, lowers the fees and raises the amount homeowners can borrower against. It’s expected these provisions will become active around Nov. 1st, but as of today we haven’t seen any Mortgagee Letter.
While the origination fees are capped at $6,000, it’s only one part of the total cost which can total as much as 10% of a home’s value, says David Certner of AARP. advocacy group for older people. It’s comments like this from AARP that bother me. Even though AARP was supposedly a big supporter of the changes included in HERA, it’s clear people in their organization still aren’t behind the product.
Earlier this year in a Bloomberg article Certner said, “This is still a high-cost product and not one that should be someone’s first choice when looking for additional income”. He added, “Homeowners with a home value of $400,000 can now participate and will pay $6,000 in origination fees, instead of $8,000”.
AARP should stop criticizing reverse mortgages unless they start providing alternatives they’ve “deemed” worthy.