I have been recently challenged by some readers (originators) who feel they should not have to discount fees on reverse mortgages. They have questioned my knowledge of the program, accused me of non compliance and have been downright offended at my desire to give my customers a better deal. I can understand why, of course, these mortgage originators come from the old school and the forward mortgage world where they were used to making a killing on each and every loan. Not me, I started in this business in reverse mortgages only, in 2003 when the average
origination fee was much lower than today and I made just a percentage of that fee after the split with my employer. Well, I am still 100%, a reverse originator and derive all of my income from reverse mortgages. Unlike the others, today I feel fortunate to make more per loan and usually discount my fees. Maybe I am just more generous but I remain curious. If you don't discount the fee, are you also recommending the borrower pay the higher servicing fee of $35? C'mon, tell the truth, your paper trail will always be there as evidence. Ok, so if you've said yes, then I expect you are of the thinking that your time, knowledge and advise is worth all of that money and you don't discount and probably sell the higher servicing fee as well to assure you will also receive a little yield spread or service premium bonus. While I don't think you are doing anything wrong, I do believe you could do better. After all, if you are giving your borrowers such good (expensive) advise, why not advise them to select the lower servicing fee of $30? That is what they are paying you for.
The mortgage business has changed and we should no longer expect to make as much as possible on every loan. If you do business by charging the higher of both fees, you are what is wrong with the mortgage business and you are contributing to higher regulation and the collapse of the industry as we know it.
FHA no longer allows originators of forward mortgages to make large origination fees or any yield spread whatsoever if the borrowers are buying the rate down. FHA also believes that yield spread premiums should be used to discount borrowers up front fees. It's just a matter of time before it becomes more than a suggestion.
It's also just a matter of time before reverse mortgages come under the same scrutiny and we are forced to do some discounting or just take another pay cut. Why not come over to my side and just do it! Just give them a discount, they are good people and they deserve it.
If you are planning to do a reverse mortgage, go ahead and ask for a discount. You'll end up with more money in your pocket if you can get one. Please also ask if the $30 servicing fee is available for the type of loan you have selected or have been advised to do. While not a guarantee, you should at least ask. If you don't receive any discount and are presented with the higher servicing fee, give me a call. I'll see what i can do to help out.
Michael Manfredi
Mortgage Concepts, LLC
480-306-4432
