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In July George Bush signed the big housing bill with provisions to for two important reverse mortgage changes.

The one most people were concerned about was FHA increasing its its national loan limits up to four hundred seventeen thousand dollars. The other, less known change, was a reduction in lender fees.

Here is how it works; the origination fee is two percent of the value of the home up to $200,000. For values above 200k and up to 417k the fee increases by 1%.

Let's use a $300,000 valued house. The orgination fee for th first $200,000 will be as much as $4,000. For the additional $100,000 in value it can be as much as $1,000. The maximum origination is $5,000.

Before the law was changed the lender could charge 2% regardless of value, up to the FHA limit.

What does AARP really expect of the lender? Should the lender price itself to point where the owner should take a second job? It sounds like it.

Origination fees are how lenders make money. Don't forget you have to pay all your expenses prior to actually going home at the end of the month with any money in your wallet.

Furthermore, traditional mortgage origination fees are no less expensive if you examine them closely.

People see a forward mortgage and say, "Hey, you reverse guys sometimes charge twice that". The reason is forward mortgages build in the difference into the interest rate in what is known as a service release premium.

Although reverse mortgages have SRPs they are very small, which is why the higher origination fee must be charged.

Is it possible that AARP is just putting on a good face to keep up appearances for their senior contituency?

Afterall, they do have a growing senior population to sell insurance to. Do they ask their client insurance companies to take a hit like they mortgage companies?

Oh, don't think so. Insurance commission is the number one money maker for AARP. It's a money train.

AARP is a useful informative of company, but they are off the mark this time.