Comments on: how do banks make money from a reverse mortgage ???

By: Byron W

Byron W — Sat, 03 Jul 2010 19:03:16 +0000

Banks make money by charging interest, as with any loan. The interest rate is related to the prime rate. The originator or broker makes money from closing costs. They do NOT make extra money if you "die early." There is no "die early", we gambled and we won, provision on the banks part. Fannie Mae purchases all HECM loans.

By: wpepper

wpepper — Sat, 03 Jul 2010 19:03:16 +0000

the bank loans money based on the value of
home + land+ buildings, barns, etc; they usually
loan less than the full appraised price(about 80%
in todays market) When homeowner dies the bank
sells the house and pockets differerence between
sales price and amount loaned. this homeowner
lived 2 years after he got the loan
v=value of home 100k
m= mortgage(amount loaned to homeownr)80k
sp= sales price(in calif usually appreciates)130k
A = appreciation amount about l5% a year
I=interest bank charged + 2k closing costs=2800.
2000 +1000 insurance dededucted froml homeow
80k less 3000=77k bank makes 54k in 2 years.

By: Nate

Nate — Sat, 03 Jul 2010 19:03:16 +0000

Basically, the bank makes an investment that you will die before they overpay the value of your house to you. There are age requirements, so chances are you will, but if you outlast the set term, the bank loses money; rarely happens if ever.