The origination fee covers the lender’s costs (office costs, paperwork, marketing, etc.) associated with making the reverse mortgage loan and provides a margin of profit.

HECM regulations limit the origination fee for this type of reverse mortgage to 2% of your home’s value or 2% of your county’s 203-b limit, whichever is less. If this amount is less than $2,000, a lender may charge up to $2,000. The Fannie Mae Homekeeper and Financial Freedom reverse mortgage programs have somewhat different limits on origination fees.

Reverse mortgage origination fees can be financed, (i.e. rolled into the loan) so that the borrower does not need to pay the costs out of pocket.

Although there are upper limits on origination fees, they still can vary from lender to lender. If you are thinking of getting a reverse mortgage, it is worth shopping around to assure you get the most competetive fee.

A Few More Related Articles of Interest:

Reasons Why a HELOC Isn’t the Answer to High Reverse Mortgage Costs

How the new housing bill affects reverse mortgages.

NAMB - National Association of Mortgage Brokers

Borrowers Should Consider Face to Face HECM Counseling Their Right

Compare Reverse Mortgage Programs