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HECM Questions and Answers
What is the HECM Loan “Advisor” Program?
A program developed
and offered by certain FHA-approved lenders and loan
correspondents (“HECM Loan Originators”). Under it, duly
licensed mortgage brokers (“Advisors”) are retained, and
paid out of HECM loan proceeds at closing, by seniors
interested in securing a HECM loan from such HECM Loan
Originators. The Advisor provides education, advice and
determines suitability of a Reverse Mortgage for the senior
as well as assisting the senior in dealing with the
lender/loan correspondent during the application process.
Who hires or retains
the Advisor?
Only the senior HECM loan applicant. The Advisor works only
for the senior. The Advisor does not work for the HECM Loan
Originator. The Advisor does not originate the
HECM loan; the HECM Loan Originator does.
Do
Advisors perform any HECM loan origination functions?
No. Only FHA approved HECM Loan Originators perform HECM
loan origination functions. Advisors only advise the seniors
who chose to retain them to provide advice and assistance.
Who pays the
Advisors?
Senior HECM loan applicants choose to retain Advisors and
pay the amount the seniors who retain them agree to pay
them. The Advisor's fee is paid by the applicant through the
disbursement of monies at the closing of loan and will
reduce the origination fee that the Lender will receive in
connection with the HECM Reverse Mortgage Loan.
What’s the
maximum amount a Senior HECM loan applicant can be charged
for Advisor Fees and the HECM Loan Origination fee?
The combined HECM Loan Origination fee and Advisors Fee may
not exceed the maximum HECM loan Origination Fee that FHA
permits (2% of the appraised value or the FHA Lending
Limit). This means the loan origination fee paid to the
FHA-approved lender or loan correspondent is reduced by the
amount that is paid to the Advisor so as not to exceed the
2% maximum allowable loan origination fee. As a result, in
no event does the participation of an Advisor increase the
cost to a senior for the origination of HECM loan above the
maximum amount that the FHA itself has determined is a
reasonable origination fee for its origination.
Can the Advisor
refer the client to the FHA-approved lender or loan
correspondent and receive a referral fee?
No. This is in direct violation of Section 8 of RESPA (Real
Estate Settlement and Procedures Act). RESPA has strict
fines and penalties including possible imprisonment for the
payment of referral fees or splitting of any fee received
for rendering a settlement service in connection with the
origination of a federally related mortgage loan (including
a HECM loan), other than a payment for services actually
rendered in connection with such loans.
Must the Advisor
be a licensed mortgage or real estate broker?
Yes, the Advisor must be licensed to broker mortgage loans
in all states in which it does business, unless the state
does not regulate mortgage lending or unless you are
otherwise exempt from state law. The Advisor must be in the
business of originating mortgages and may not be FHA
approved.
May I act as an
advisor if I am a FHA-approved Lender or Correspondent?
No. Advisors may not be FHA approved lenders or
correspondents.
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