Kathie Adler – Reverse Mortgage Blog

NEW Reverse Mortgage Program! HUD Announces HECM Saver! Lower Closing Costs . . . 

Posted on October 31, 2010. Filed under: Uncategorized |

Announcing the HECM Saver – Putting Money in Your Pocket With a Reverse Mortgage Just Got Easier and Much More Attractive!

The FHA Reverse Mortgage has just gotten a facelift, and it’s about time. What seniors have disliked most about Reverse Mortgages are the high closing costs. I have heard this for years, and I always agreed much to the chagrin of a former fellow loan officer who once told me, “Don’t agree with them!” “Why not?”, I answered. “It’s the truth, isn’t it?!” I never blamed borrowers for hating the high closing costs because putting myself in THEIR shoes as a borrower I would have hated them too. I wasn’t a salesman trying to make a fast buck, I was a caring loan officer with a senior borrower sitting in front of me who had needs, and I was there to help.

Reverse Mortgages can be costly, but being an FHA loan with the required up front mortgage insurance premium, they are not much more expensive than the typical FHA mortgage. And you don’t pay the up front mortgage insurance out of pocket.  It gets financed as part of the loan. But even though you don’t lay it out and it gets rolled into the costs of doing an FHA loan, it means financing more money and stacking up more interest.

Borrowers did not like the Mortgage Insurance fee (2% of the appraised value.) So, for example, if a home appraised for $600,000 that tabulated to a mortgage insurance premium up front of $12,000 at closing, an amount that would be financed as part of the loan but high nonethless. It was extremely distasteful to borrowers as well as loan officers.

Hud, however, has listened. HUD announced a new program called the HECM Saver which took effect October 4th. The proceeds to the borrower are reduced from the standard HECM, but the good part is that the required FHA up front mortgage insurance premium is now less (0.01%) and is now spaced out over time (1.25% of the outstanding loan balance per year.) For borrowers who are satisfied with smaller proceeds, the HECM Saver is a great alternative due to significantly lower closing costs. (HECM Savers are for Fixed and Adjustables.) The HECM Saver opens the door to seniors who have thus far closed the door on this life changing program. For senior borrowers that may be looking for maximum borrowing power, the HECM Standard would be the better option. Compare programs to see what’s best for you.

With the new HECM Saver program borrowers will receive less money, however, the up front mortgage insurance premium is only .1%. This tabulates to only $60.00 on a $600,000! Of course the yearly mortgage insurance has increased, so with the new program the continuing yearly mortgage insurance premium is calculated by multiplying 1.25% times the entire mortgage balance. But it’s spaced out over time and the best part is that the floor rate has been reduced so proceeds are that much more!

For years the cost to secure a Reverse Mortgage was anywhere between $15,000 to $22,000 depending on appraised value. With HECM Saver this has been drastically reduced. The HECM Saver is available as a fixed or adjustable program. If you are looking for higher proceeds you can still choose the HECM Standard fixed or adjustable. Be sure to ask for a comparison of products so you can see the amortization chart for the HECM Saver as well as a Good Faith Estimate so you can compare it to the HECM Standard. Then you can decide which program best suits your needs, the HECM Saver or the HECM Standard?

I try to help borrowers solve questions. What are they looking to do with their money? How much money do they need and when? I always tells borrowers don’t take more than you need. In the final analysis it’s up to homeowners to choose a program for their needs, but mortgage originators like myself can certainly explain the programs so senior homeowners can clearly see what’s best for them.

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