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November 19, 2017

Brokers Are Lazy

Mortgage Professional America: Are brokers really lazy? Here's what an industry giant says

One of the biggest lenders in the mortgage industry has sounded off on a comment made on the MPA forums.

On Tuesday, MPA forum poster Michael responded to a 
story about broker involvement by saying that “brokers have always been and always will be complacent and LAZY!!! They just will NOT get involved, they want someone else to do it for them. This has been their history during the 30 years I have been in this business.”

The comment ignited a firestorm on the forum; even NAMB President John Councilman chiming in to defend brokers. “My take is that people are so busy disclosing, re-disclosing, processing and reprocessing, that they can't spend a lot of time on anything else,” Councilman wrote.
And the head of one of the country’s largest wholesale lenders reached out to MPA to chip in his two cents.

“I disagree strongly,” said United Wholesale Mortgage President Mat Ishbia. “Brokers aren't lazy. They’re hard-working small business people who are the very fabric of our country. … We have brokers who are harder workers than anyone else I know. They’re out there on the street, working in their communities. Without them, we’re not going to be successful – not only (UWM) as a company, but all of us as an industry.”

For supposedly “lazy” people, Ishbia said, brokers do quite a lot that other mortgage professionals don’t have to.

“They’re the most educated mortgage professionals, especially now. They have to go through all the licensing, all the testing,” he said. “Banks don’t have to have their loans go through all that testing. They don’t have that scrutiny. The ones that are around today, especially – who’ve been through QM and all the regulatory rules – are some of the best mortgage professionals around.”

Ishbia said he believed strongly in the broker model – not only professionally, but personally.

“The best place for a borrower to get a mortgage is at a broker. Brokers have more options than any mortgage bank. Mortgage brokers have all different lenders they can try,” he said. “When I have a friend who needs a loan, I always refer him to a broker, because that’s going to be where he gets the best deal. Consumers want the best deal for them, and mortgage brokers are the best way to go.”

-- Matt Ishbia
President of UWM

November 18, 2017

The Biggest Mistake We All Made This Year!

The best reason to pull cash out of your home right now!

If in January of THIS YEAR you had pulled out $100,000 from your home and purchased bitcoins with it, today it would be worth $1,000,000.

Bitcoins are worth more than gold and appreciate faster than real estate! The riskiest, yet highest yielding.

This was written TODAY:

Couple years ago:

November 17, 2017

$250 For Each Existing Client Of So EZ Mortgage From 2013 - 2017 Retro Active

Leave us a review on any of the below websites to be entered into our monthly sweepstakes to win $250 with no strings attached. Since this is for existing clients only, we have your information, we just want a review. 

For those who do not leave reviews, you may refer a friend to be entered in as well or do both to increase your chances.

At least 1 in 5 will be a  winner! 

If you copy and paste your review to other sites, you will increase your odds, 5 reviews, or referrals or combination would be a guaranteed win. This is retro active, however you do have to ask in order to receive it.


When you leave a review, try to refrain from saying things like, "he was great", this is your opinion and your opinion of great may differ from someone else's.

Explain why you felt the way you did. For example: Michael or So EZ...

Locked our loan within minutes of our decision and he did not require an application fee or deposit.
Answered the phone every time we called.
I could reach him on the weekend. I could call him late at night. He was available 7 days a week
Always kept us informed of what was happening.
Closed my home in less than 30 days. Closed my home in less than 21 days.
Closed my loan the same day I signed, I was able to move in that night. 
Did this for me, when other lenders where going to do this.
Gave me a rate that was lower than all the others I compared them too.
Wrote me a check out of his own pocket to make my loan truly free!
Paid for my appraisal up front!
Refunded the appraisal fee even though the credit did not cover it.

The easiest way to leave a review is by clicking here to leave one on Google.

For more information ask Michael Hansen at NMLS ID 344532. 

You must be a client of So EZ Mortgage. Your loan does not need to close to be eligible.

November 16, 2017

These are the fastest-growing cities in America

Frisco is the fastest-growing city in America. No, not THAT Frisco with the incessant fog and Golden Gate Bridge (not to mention, locals will scoff if you call it Frisco).
We’re talking Frisco, Texas. The Dallas suburb scored No. 1 on WalletHub’s list of fastest-growing cities in America due to its rapid job and population growth. The city is home to the National Videogame Museum, Dr Pepper Arena (home of the Frisco RoughRiders), and the Dallas Cowboys headquarters. It has a number of other accolades to its name, including Men’s Journal’s No. 1 Best Place to Raise an Athletein 2011 and Movoto’s best midsize city to move to in 2013.
Here are WalletHub’s 10 fastest-growing cities in America:
Frisco, TX
Kent, WA
Lehigh Acres, FL
Meridian, ID
Midland, TX
McKinney, TX
Fort Myers, FL
Bend, OR
Austin, TX
Pleasanton, CA
And here are WalletHub’s 10 slowest-growing cities in America:
Shreveport, LA
Jacksonville, NC
Fayetteville, NC
Decatur, IL
Montgomery, AL
Baton Rouge, LA
Davenport, IA
Fort Smith, AK
Racine, WI
Waterbury, CT

To compile the ranking, WalletHub analysts compared 515 cities of varying population sizes based on 15 key measures of both growth and decline, such as population, unemployment rate and regional GDP per capita over a period of seven years.
Here are WalletHub’s fastest and slowest-growing cities, broken out by large, mid and small-sized cities:


November 7, 2017

Mortgage Rates Forecasted To Rise 2018

I would like to first state, that I predict rates will stay low and go lower overall, to increase home values. However if values raise to quickly rates will rise to compensate until values stabilize and then dip again.

Michael James Hansen

And now this from: Mike Sorohan on:October 25, 2017

DENVER--The Mortgage Bankers Association projects 2018 purchase originations to reach $1.167 trillion, a 7.3 percent increase from 2017.
But the MBA forecast also calls for a 28.3 percent drop in refinance originations, to $430 billion. Overall, MBA expects mortgage originations to decrease to $1.597 trillion in 2018, from $1.688 trillion in 2017.
For 2019, MBA forecasts total originations to increase to $1.64 trillion, with purchase originations rising slightly to $1.24 trillion and refinances dropping to $395 billion.
In addition to the updated forward-looking forecast, MBA upwardly revised its estimate of originations for 2016 to $2.05 trillion from $1.89 trillion, to reflect the most recent data reported in the 2016 Home Mortgage Disclosure Act data release.
MBA Chief Economist Mike Fratantoni said 2018 home purchase originations could increase at nearly double the clip from 2017.
"The housing market has been hamstrung by insufficient supply, with inventories of homes remarkably low, given the home price growth we've experienced," Fratantoni said. "The job market remains strong; demographic trends are quite favorable; mortgage credit is becoming more available to qualified borrowers; and home prices should continue to rise. All the pieces are in place for stronger growth in 2018 and beyond."
Other key housing projections:
--MBA forecasts projects housing starts to rise steadily over the next few years, rising to 1.289 million in 2018 from 1.195 million in 2017, rising further to 1.376 million in 2019 and 1.438 million in 2020.
--Home sales are expected to show steady increases in the MBA forecast, with existing home sales rising slightly to 5.486 million units, seasonally adjusted, from 5.440 million in 2017. Existing home sales are expected to rise further to 5.810 million in 2019 and 5.991 million in 2020.
--New home sales are also expected to improve, rising to 623,000, seasonally adjusted, in 2018 from 584,000 in 2017 and to 662,000 in 2019 and 696,000 in 2020.
--Interest rates for 30-year fixed rate loans should rise slowly, finishing 2017 at 4.0 percent, rising to 4.6 percent in 2018, 5.0 percent in 2019 and 5.3 percent in 2020.
--Mortgage debt outstanding is expected to rise to $10.370 trillion in 2018 from $10.010 trillion in 2017, and increase to $10.760 trillion in 2019 and $11.130 trillion in 2020.
On the economic front, MBA projects overall economic growth at 2.0 percent for 2018, slowing slightly to 1.9 percent in 2019 and 1.8 percent in 2020. "We still expect long run growth potential in the US to be somewhat lower, as productivity gains have been persistently slow," Fratantoni said.
Although inflation remains low, Fratantoni said a tight job market is likely to increase inflationary pressures in the near term. MBA expects the Federal Reserve to raise rates this December, three times in 2018 and twice in 2019.
"The Federal Reserve has begun reducing its holdings of Treasury securities and mortgage backed securities, and this will put additional, modest upward pressure on mortgage rates," Fratantoni said. "We expect that the 10-Year Treasury rate will stay below 3 percent through the end of 2018, and 30-year mortgage rates will stay below 5 percent."
MBA projects monthly job growth will average 125,000 per month in 2018, down from 150,000 per month in 2017, and that the unemployment rate will decrease to 4.0 percent by the end of 2018.

Grant Deeds and Quit Claim Deeds

Grant Deed

A Grant Deed implies the following:
  1. The Grantor has not transferred ownership in this property to any person other than the Grantee.
  2. That the property is, at the time of conveyance, free from liens or encumbrances incurred by the Grantor.

Quit Claim Deed

A Quit Claim Deed transfers only any present title, right or interest that the Grantor may have. There are no warranties regarding liens or encumbrances and no representation of either past or future ownership. This is one of the reasons that a Spousal Quit Claim Deed is used to relinquish any potential interest of the spouse when a purchase is made.

An REO transaction is another example of when a Quit Claim Deed may be used. The REO Owner may or may not be aware of the preforeclosure history of the property. REO owners who have no such knowledge may be unwilling to give a new buyer the implied warranties provided by a Grant Deed. Without those implied warranties, the buyer accepts the risks that may have been covered by those implied warranties. Title insurance can help to play a vital role in protecting the buyer's ownership interests and reduce those risks in certain circumstances.

The #1 Title Company Recommended by So EZ Mortgage. 


November 4, 2017

Top 9 Ways to Sell Your Home to the Avocado Generation

If you're trying to sell your home, there's a good chance that a millennial will be one of your prospective buyers. So how does this generation feel about homeownership? And how can you make your house more appealing to them? We have answers.

It is the age of Instagram and Snapchat, specifically when it comes to millennials. These social platforms have raised the bar when it comes to viewing photos online. Take a moment to consider how people will find your home's listing. Eighty percent of home buyers are starting their search on websites like Zillow or Trulia, and they're either using phones, tablets and laptops to do it. This means that their first impression of your house is coming from a description and, more importantly, photos.

Snapchat, which has been one of the most successful social platforms for millennials, also provides some opportunities for selling your home. Snapchat allows you to set a geofilter – which is an overlay that can be added to a picture or video – to any location. You can actually place a geofilter specifically around your house so prospective buyers can interact with it on your property.
If you're going to go this route, make sure people know about it. Create a sign to explain that you have a geofilter at your property. Most people don't currently assume that a geofilter will be placed at an open house.
Real estate information website has a great tutorial on making a Snapchat geofilter for selling real estate
1.     Quality of Photo
Most importantly, you absolutely need to have pictures in your online listing. This is a must whether you're marketing to millennials or anyone else. The quality of the pictures need to be up to snuff as well. Make sure the house's lights are on – try to rely on natural lighting as much as possible – and check that the camera is steady. It's essential that you use a good camera. It may not make sense to take a picture with your phone. If you're trying to gauge this, take a step back and consider if the image would be good enough for HGTV. If not, try again with better equipment.
You can potentially hire a photographer (this could be an expensive option) to take a few shots, or you could borrow or rent a camera to take your own photos. If you're going to do it on your own, try to get a camera that has a least five megapixels. The point is that your photos need to stand out against other images on home listing sites. Think about it like any other social media posting. You're competing with everyone else who's selling a house. If you wouldn't give it a "like" on Instagram, it's not ready for its big debut.
2.     Staging the House
This shouldn't be your grandma's house. The knickknacks, flowery wallpaper and dust need to go. Staging is a must, specifically when marketing to the millennial home buyer. For many of this generation, this will be their first time buying a home. Staging will give them a visual on how they could live in this space.
While there are a variety of considerations for decorating and updating, there are a few key areas where you should start. Cleaning and decluttering are a must. You'll also want to depersonalize your space. After all, you're not trying to sell the house to you. You're trying to make it appealing to a wide variety of prospective home buyers.
While you shouldn't try to mislead the prospective homeowner about your property, do your due diligence to make your home appear and feel as comfortable as possible. In many cases, it may make sense to stage your place with home décor to give it a more modern aesthetic.
3.     Go Small or Go Home
Don't live in a 3,000-square-foot house in the 'burbs? There's good news! Bigger isn't always better when it comes to home-buying millennials. After all, many were either directly or indirectly affected by the financial crisis of 2008, watching their parents and grandparents lose significant value in their homes. The result has made numerous millennials tentative – and dare I say more strategic – than their previous generation's counterparts.
The trend of the millennial generation is to buy smaller, older homes. The purpose of this is twofold: first, it allows them to buy a home with a smaller down payment or pay a smaller monthly mortgage payment, and more importantly, it gives them a chance to build equity in a house. This means that they'll be able to use this starter home as a stepping stone to buy a larger home down the line.
4.     More Amenities, Please!
While space isn't as big of a concern for most millennials, they want their homes to come with modern and high-functioning amenities. This includes items like dishwashers, washers and dryers, and space to exercise in the home. If you're selling a condo, having access to personal amenities isn't necessarily a must. In a study conducted by Zillow, 54% of millennial home buyers are comfortable with and expect communal amenities, like a laundry or exercise room.
Home automation is another type of amenity that piques the interest of millennials. Many want the ability to interact with their homes in the same way they do with their smartphones. There are varying levels to the smarthouse setup, whether that's automated security, heating and cooling, lights – the list goes on. But if you really want to appeal to millennials, start thinking about ways to make your home more tech savvy.
5.     Selling DIY and Handling Maintenance
If your house has some unfinished projects, millennials might be a good target audience – they've grown up with YouTube and a variety of home renovation shows on HGTV. Calling a home repair specialist doesn't necessarily have to be the go-to for millennials. They're willing to roll up their sleeves and learn about the responsibilities of homeownership, especially if the price is right.
Make sure that you don't confuse "project" with "maintenance," though. Millennials expect all things to be quick, efficient and long-lasting. They're a microwave generation and convenience is of the utmost importance.
When prepping your home to sell, think about renovations that speak to the utility-focused millennial. Consider switching out carpeting – which stains easily and requires regular vacuuming – with hardwood floors. Similarly, synthetic or composite decking might appeal to them over a traditional wooden deck. Often made of recycled materials, this option will need only a periodic clean with soapy water. And these low-maintenance options can even extend into the yard. Take a look at xeriscaping, which is both energy efficient and requires less time mowing during summer.
6.     Showcasing Multifunctional Spaces
While we can't put all millennials in a single category, there appears to be a trend of pursuing interior layouts with more open space that can easily be used for multiple purposes. They do this both for social and practical reasons. Socially speaking, this allows them to interact casually with guests throughout the entire house. They aren't confined to just hosting in the dining room. They have the option to move around the home and entertain casually.
When it comes to smaller homes and condos, having multifunctional spaces is also a necessity. In an interview with REALTOR® Mag, Arthur Lasky explains that "Exercise equipment may share space in a bedroom, and a hammock may get tucked away into a dining corner if there's little outdoor space."
As you're prepping your home for millennial buyers, make sure you show off your home's versatility. You don't necessarily need to knock down a wall to create a more open floor plan. Start by shopping at a store like IKEA or the Container Store, where you can model different ways to use your home's space.
7.     Outdoor Spaces
According to Better Homes and Gardens Executive Editor Jill Waage, "Seventy-five percent of millennials want relaxing outdoor spaces," including amenities like vegetable gardens, decks and fences. When it comes to prepping your home for the millennial buyer, spend some time focusing on curb appeal. Is there sufficient space for relaxing or an outdoor gathering? It doesn't have to be the large backyard with a white-picket fence, but make sure it's a space that prospective home buyers could feel comfortable in with their friends (or a good book). There are plenty of great landscaping ideas that you can do with a small backyard.
You should also think about outdoor extras that you could throw in with the purchase. Could you include a grill? How about the riding lawn mower? A perk can do wonders when it comes to any potential home buyer.
8.     Green, Value-Driven Millennials
Think about the advertisements you've seen in the last month. As you've probably noticed, millennials are marketed to differently than previous generations. Now, it's not just about the quality of the product or even the celebrity who's enjoying the product. Advertisers are now – more than ever – promoting causes and charities in their commercials and ads. Millennials want to know that their money is going to more than just a product; they want to attach their spending to something that will make the world a better place.
The same is true for buying a home. Millennials are focused on their home's impact on the environment and their overall energy consumption. When marketing your home to the millennial buyer, consider how your house can follow that narrative. There are a wide variety of ways to make your home more energy efficient, many of which can be quickly implemented. Not only will these changes appeal to their values, but it also helps them save money.
9.     Infographics
That said, if you want to go the extra mile, there are some other options to market your home. One often underutilized way are infographics. Infographics are illustrated images that take a lot of information and simplify it through easy-to-understand pictures. This allows you to highlight how your home stands out above the rest, including the improvements you recently made. And you don't have to be an artist to have this done. There are websites like Fiverr that will team you up with infographic specialists. For around $25, you can send in some facts about your home, and an artist will generate an easy-to-understand – and aesthetically pleasing – infographic. You can then either upload that infographic to places like Zillow and Trulia, or you can provide a physical copy at an open house.
Selling Your Home
When preparing your home to sell, it's important to consider the buyer. And millennials are making up more of that prospective home buyer audience. You shouldn't market your home to millennials the same way you would to baby boomers or Gen X-ers. Having a listing in the local newspaper probably isn't going to pique their interest (or even be seen).
Instead, play to the millennial aesthetic, their pursuit of philanthropy and their desire to be relationally connected to the thing they're buying.
Using these tips, you'll be better equipped to prep your home to sell. Millennials are the up and coming generation. Make sure your home is ready.

November 3, 2017

Watch This Video Before Ordering An Appraisal

We utilized the expertise of Gina Birkholtz, Owner of Birkholtz Appraisals, when constructing this 58 second video, to help you save money and get the optimum opinion of your home on your appraisal report.

If you would like to order an appraisal from Birkholtz Appraisals, visit her website:

Loan Estimate Explained by Michael James Hansen with So EZ Mortgage

It's So EZ Version

October 24, 2017

Realtors! Need A Purchase Pick-Me-Up?

When Clients Run Into Problems, We Make Changes To Make Life EZ

Earnest Money Deposit

Beginning 11/1 we will require a copy of the EMD check for all purchase loans before the loan will move to underwriting, allowing the UW to condition the loan the best way. The client may have extra assets which would eliminate a condition for proof of where the EMD check came from.

Enhanced Closing Disclosure Process

Closing Disclosures are now released automatically instead of manually, meaning clients may be able to acknowledge their CD sooner and close faster! The CD
may be delivered to the clients prior to the clearing of all client and vendor conditions, expediting the acknowledgment process.

Property Hub

Get all the property valuation data you need in one place! Have educated, proactive conversations with your clients. Save time with one quick search.


What Do Loan Officers Actually Do?

Loan officers can specialize in consumer, mortgage or commercial loans and often work for commercial banks, mortgage companies or credit unions. They act as the liaison between the institution and the applicant, and will seek to find a loan arrangement that is in the best interests of both parties.

However at So EZ Mortgage, within regulation, we are ONLY concerned with the client's best interest and we work 100% for the client, not the banks and not the government. 

Michael James Hansen

October 20, 2017

Reverse Mortgage - HECM Application Fees and Disclosures - How To Understand Them

If you proceed with the loan, you now select a lender. The person you will be dealing with is called a loan originator or reverse mortgage consultant.

You may be asked to provide some personal information, so that the loan officer can determine whether or you are eligible for a reverse mortgage. Even if you are eligible, you are never obligated to get the loan. You will have opportunities to change your mind. You may be asked to select a loan payment plan. Payment plans can be fixed monthly payments, a lump sum payment, a line of credit, or a combination of these.

Lenders conduct "financial assessments" of every prospective reverse mortgage client during the application process to ensure you have the financial means to continue paying property taxes, homeowners insurance, homeowners association dues, and other property charges.

Lenders analyze all income sources -- including pensions, Social Security, IRAs and 401(k) plans -- as well as your credit history. They look closely at how much money is left over after paying typical living expenses. If a lender determines that you have sufficient income left over, then you won't have to worry about having any funds set-aside to pay for future tax and insurance payments.

If, however, a lender determines that you may not be able to keep up with property taxes and hazard insurance payments, they will be authorized to set-aside a certain amount of funds from your loan to pay future charges. The amount of the set-aside will be based on the life expectancy of the youngest borrower. If set-aside funds run out, you must continue paying property charges using whatever funds are at your disposal. Even if you don't need a set-aside, you can still elect to have one established voluntarily. The lender can pay your property charges either from a line of credit or by withholding monthly disbursements.

The costs that the lender describe to you are capped and may be financed as part of the reverse mortgage. They can include the following:

Origination Fee
The origination fee covers a lender’s operating expenses associated with originating the reverse mortgage.

Under the HECM program, which accounts for most reverse mortgages made in the U.S. today, the maximum origination fee allowed is 2% of the initial $200,000 of the home's value and 1% of the remaining value, with a cap of $6,000.  Some lenders waive or reduce the origination fees on certain products.

(Note: Many of the calculations and fees on a HECM are based on the Maximum Claim Amount, which is the value of the home at the time of loan origination, but which currently has a maximum limit of $625,500.)

Mortgage Insurance Premium
The Mortgage Insurance Premium (MIP) is a fee paid by the borrower to the Federal Housing Administration (FHA), an agency of the federal government, to provide certain protections for both the lender and the borrower in a HECM reverse mortgage.

If the company servicing the loan can no longer meet its obligations, FHA assumes responsibility for the loan, providing the borrower with uninterrupted access to any remaining reverse mortgage proceeds.

In cases where the sale of the home is not enough to pay back the reverse mortgage, the insurance protects the borrower or estate from owing more than the sale price by covering losses incurred by the lender.

The MIP paid upfront equals two (2) percent of the home's appraised value or FHA lending limit ($636,150), whichever number is less.  .

You also are charged MIP on an annual basis -- 0.5 percent of the outstanding loan balance -- however this fee doesn't come out of your available loan proceeds. Rather, it accrues over time and you pay it once the loan is called due and payable.

Appraisal Fee
An appraiser is responsible for assigning a current market value to your home. Appraisal fees vary by region, type and value of home, but average $450.

This is the one fee generally paid in cash, often before the loan is made, and not with the loan proceeds. In addition to placing a value on the home, an appraiser must also make sure there are no major structural defects, such as a bad foundation, leaky roof, or termite damage. Federal regulations mandate that your home be structurally sound, and comply with all home safety  and local building codes, in order for the reverse mortgage to be made. If the appraiser uncovers property defects, you must hire a contractor to complete the repairs.

Once the repairs are completed, the same appraiser is paid for a second visit to make sure the repairs have been completed. Appraisers generally charge $125 dollars for the follow-up examination.

If the estimated cost of the repairs is less than 15 percent of the Maximum Claim Amount, the cost of the repairs may be paid for with funds from the reverse mortgage loan and completed after the reverse mortgage is made. A "Repair Set-Aside" will be established from the reverse mortgage proceeds to pay for the cost of the repairs. The homeowner will be responsible for getting the repairs completed in a timely manner.

Closing Costs
Other closing costs that are commonly charged to a reverse mortgage borrower, which are the same for any type of mortgage, include:

Credit report fee. Verifies any federal tax liens, or other judgments, handed down against the borrower. Cost: Generally between $20 to $50;
Flood certification fee. Determines whether the property is located on a federally designated flood plain. Cost: Generally about $20;
Escrow, settlement or closing fee. Generally includes a title search and various other required closing services. Cost: can range between $150 to $800 depending on your location;

Document preparation fee. Fee charged to prepare the final closing documents, including the mortgage note and other recordable items. Cost: $75 to $150;
Recording fee. Fee charged to record the mortgage lien with the County Recorder’s Office. Cost: can range between $50 to $500 depending on your location;

Courier fee. Covers the cost of any overnight mailing of documents between the lender and the title company or loan investor. Cost: Generally under $50;
Title insurance.Insurance that protects the lender(lender’s policy) or the buyer (owner’s policy) against any loss arising from disputes over ownership of a property. Varies by size of the loan, though in general, the larger the loan amount, the higher the cost of the title insurance;

Pest Inspection. Determines whether the home is infested with any wood-destroying organisms, such as termites. Cost: Generally under $100;
Survey. Determines the official boundaries of the property. It’s typically ordered to make sure that any adjoining property has not inadvertently encroached on the reverse mortgage borrower’s property. Cost: Generally under $250
(Note: Cost estimates can change over time. For most current costs, consult a lender. Also, some states may have local fees that are not included here.)

Servicing Fee & Set-Aside
A lender typically earns monthly fees, known as servicing fees, for its administration of the loan. These can be a fixed monthly amount or calculated into the interest rate on the loan. If a fixed monthly amount is to be charged, an amount of funds will be "set-aside" from the loan proceeds, to be used to pay this monthly fee.

The service fee set-aside is deducted from the available loan proceeds at closing to cover the projected costs of servicing your account. Federal regulations allow the loan servicer (which may or may not be the same company as the originating lender) to charge a monthly fee that is no higher than $35. The amount of money set-aside is largely determined by the borrower’s age and life expectancy. Generally, the set-aside can amount to several thousand dollars.

Many lenders have either eliminated the servicing set-aside or included it in the interest rate. (Note: The servicing set aside is just a calculation and not a charge. The only amount added to your loan balance is the monthly servicing fee, which is typically $35 per month or less.)

With a reverse mortgage, you are charged interest only on the funds(loan proceeds) that you receive. For example, if you take your loan proceeds as a line of credit, you are only charged interest on the portion of the line of credit you have withdrawn.

The interest is compounded, which means you pay ongoing interest on the principal, plus accumulated interest.

Reverse mortgage products are available with both fixed interest rates and variable interest rates. The variable rate is tied to an index, such as the 1-Yr. Treasury bill or the 30-Day LIBOR (London Interbank Offered Rate), plus a margin determined by yield requirements in the financial markets. The margin is set at the time of loan origination and does not change over the life of the loan. During the life of your loan, the loan balance increases by the amount of compounded interest accrued.

Because there are no payments made by the borrower during the life of a reverse mortgage, interest is not paid on a current basis. It does not have to be paid out of your available loan proceeds either, but instead accrues, at a compounded rate, through the life of the loan until repayment occurs at the end

Other Disclosures
Your lender will supply you with a large package of additional disclosure documents that are designed to help make the process as transparent as possible.

One such document is the Total Annual Loan Cost (TALC) Disclosure, a form required by the Federal Reserve Board on all reverse mortgage transactions, that illustrates the cost of the loan if it is outstanding for different durations of time.

The Good Faith Estimate clearly discloses line-by-line the various fees that are being charged. Other disclosures, like an amortization table, illustrate the amount of interest that will accrue, so that you are fully informed about the costs associated with getting a reverse mortgage.

The application process formally begins after counseling, once you provide the lender with your loan application and the signed disclosures as well as required information, including verification of a Social Security number, a copy of the deed to your home, information on any existing mortgage(s), and a signed counseling certificate (signed by both the homeowner and counselor).

Michael James Hansen