Yesterday HUD published Mortgagee Letter 08-34 which established the new origination fee limit that may be charged for a HECM. According to the ML, all HECMs where the FHA case number is assigned on or after the date of this mortgagee letter, the loan origination fee limit will be the greater of $2,500 or two percent of the maximum claim amount of the mortgage, up to a maximum claim amount (MCA) of $200,000, plus one percent of any portion of the maximum claim amount that is greater than $200,000. Lenders may accept a lower origination fee when appropriate however the total amount of the loan origination fee may not exceed $6,000.
Origination Fee Limit Examples
- Minimum of $2,500
- 2% of MCA up to $200,000
- Additional 1% of MCA > $200,000
- Maximum amount of $6,000
Origination Services
Consistent with existing policy, the loan origination fee, which may be fully financed with HECM proceeds, includes fees paid to FHA-approved loan correspondents and covers the full array of origination services, including:
- educating the client
- analyzing the prospective borrower’s eligibility for a reverse mortgage
- taking information from the borrower and filling out the loan application
- collecting financial information, if applicable, and other related documents that are part of the application process
- initiating/ordering verification of deposits or assets, if applicable
- initiating/ordering request for mortgage and other loan verifications
- initiating/ordering appraisals
- initiating/ordering inspections or engineering reports
- providing disclosures (truth in lending, good faith estimate and others) to the borrower(s)
- maintaining regular contact with the borrower, real estate professional, and lender between loan application and closing to apprise them of the status of the application and gather any additional information needed
- assisting the borrower with understanding and resolving adverse property conditions
- ordering legal documents
- determining whether the property is in a flood zone or ordering such service
- processing the loan
- participating in the loan closing
Lenders may not charge the borrower any fees in addition to the origination fee to pay FHA-approved loan correspondents.
