This week State Employees Credit Union announced that they are offering a new “consumer-friendly” reverse mortgage to its customers. According to the press release, their product sets itself apart from other industry-standard (FHA Insured HECM) by offering a fixed rate, 1% origination fee, and no mortgage insurance or monthly servicing fee.
Phil Greer, Senior Vice President of Loan Administration said, “SECU investigated the reverse mortgage marketplace and we saw numerous opportunities to provide this important product to our members, reducing the typical costs being assessed. Through reduced fees, a fixed rate of interest and a simple interest accrual method, we will provide the member with an enhanced use of their equity. This will result in more funds being made available to the member in order to assist with their day-to-day living expenses.”
What the press release doesn’t say is SECU’s reverse mortgage isn’t a federally insured product and doesn’t have the same protections as the HECM. I called SECU and asked if they offered the HECM product or any FHA loans and they they said “no”. When I asked why not they said that they weren’t FHA approved but they felt their product was a better alternative.
As seniors continue to hear about bank failures and the bad economy you would think they would feel more safe with a HECM vs. SECU’s product. To bad credit unions like SECU can’t use the reverse mortgage advisor program to offer an insured reverse mortgage anymore.