In the last few weeks, something incredible has happened: one after another, reverse mortgage lenders have been eliminating their monthly service fees!
Most lenders typically charge around $30 per month to borrowers for as long as the reverse mortgage is outstanding. This might not seem like a lot, until you consider that over 20-30 years (plus interest), these small monthly fees can exceed $10,000. These fees are part and parcel of the allegations that reverse mortgages are needlessly expensive for borrowers and excessively profitable for lenders. Besides, given the high-upfront costs of reverse mortgages, and the fact that the monthly “servicing” involves the computerized generation and mailing of a statement to the borrower, it’s a fee that’s difficult to justify.
For that reason, MLS Reverse Mortgage of Auburn, California, became the first lender to officially eliminate its monthly servicing fee. A handful of other lenders quickly followed suit, and the (publicized) total is now four. Call it a cheap publicity stunt, a strategic move to gain a competitive edge, or even a sincere effort to respond to critics; regardless, the move has been greeted positively by consumer advocates and borrowers. Not only will borrowers save money over the life of the mortgage, but these savings will translate directly into larger borrowing limits of $5,000+ for an average borrower.
Theoretically, the elimination of monthly service fees shouldn’t come with any strings attached. Still, it’s important to read the fine print and do some comparison shopping to make sure that lenders that no longer charge service fees haven’t offset this by raising their interest rates. If all else being equal, one lender charges monthly servicing fees while another doesn’t, it will make choosing a lender all the easier.
Given that reverse mortgages are already becoming a commodity product, one would expect that all of the (large) lenders will soon follow suit. However, there may be some delays, especially in the short-term, and it wouldn’t hurt to ask your lender to consider dropping these fees in order to gain your business.
2 Responses to “No More Service Fees?”
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May 2nd, 2010 at 10:45 pm
[…] month, I reported that a handful of reverse mortgage lenders had eliminating their servicing fees, in a move that […]
January 25th, 2012 at 2:50 pm
Hello-
I have a RM with Wells Fargo, obtained 2/3 years ago. It’s a line of credit with a variable rate in lieu of a fixed. (The bank owns half my house, but will own it all one day sooner than I’d imagined at the rate things are going.)
My service fee each month is somewhere around $30! Plus, I’m paying monthly on what the bank’s original loan to me was at that time…I don’t have my statement with me, but it’s around $900.00. This was also back when the origination fees were really high and there was no negotiation. It is still way less than my mortgage was with Chase at the time, so I felt it was a good option and my only way to keep my house.
In the meantime, Wells Fargo has gotten out of the Reverse Mortgage business. They shut it down about 18 months ago and most of these specialist went to Met Life….now Met Life is or has stopped doing them.
My question is: Can I go back to revisit any of these fees in any way, either wholly or in part? Can they ever be RE-negotiated?
I plan to discuss this with them, but thought I’d ask an impartial source first.
Thank you,