Servicing a Reverse Mortgage
San Francisco Examiner, July 15th, 2009
In order to maintain a reverse mortgage over the years after
closing, a fee must be added to the overall loan amount. Service on
loan is everything lenders or their agents do after closing it.
Servicing includes sending payments to the mortgagee, making or
changing loan advances at their request, transferring insurance
premiums to the Federal Housing Administration (FHA), sending account
statements, paying property taxes and insurance from the loan, and
monitoring obligations under the loan agreement.
The FHA limits
the servicing fee to $30 per month if the loan has a fixed interest
rate, and to $35 if the rate is monthly adjustable. Otherwise, the fee
is up to the lender.
To finance this fee with the loan, a lender
is required to set aside a prescribed dollar amount and deduct it from
the available loan funds. The monthly fee is added to the loan balance
each month.
The Home Equity Conversion Mortgage is a reverse
mortgage that is insured by the Federal Housing Administration (FHA),
which is part of the U.S. Department of Housing and Urban Development
(HUD). To qualify and continue to qualify for an HECM the loan must be
maintained over the years.
As a government insured loan, HECMs
must follow particular servicing guidelines established for the
protection of the homeowner who is taking out a reverse mortgage.
Since different types of loans and lenders are abundant, HUD maintains
and updates a set of guidelines to streamline the standards for HECM
reverse mortgages.
Read more of this article.About Reverse Mortgages: Learn all about reverse mortgages at NewRetirement.com
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