Live Well Brings Fixed Rate Reverse Mortgage Below 5 Percent

201004051248.jpgLive Well Financial (LWF) released a new fixed rate reverse mortgage at a rate of 4.99%, the lowest fixed rate in 20 year history of the HECM program said the company.

“Live Well Financial is proud to be able to offer the New HECM 4.99% Fixed Rate product to our correspondent partners. This product offers maximum proceeds available from the FHA’s HECM program with the lowest fixed rate interest expense in program history and an option for zero servicing fees as well,” said Michael Hild, chairman and CEO of Live Well Financial.

The company said that comparing its 4.99% to today’s industry standard fixed rate product, a typical 70-year-old homeowner with a home valued at $300,000 would save approximately $67,000 in interest costs over 20 years.

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“We are pleased to help lead the industry in building better products for our senior homeowners, but these low rates likely will not last for long. Serious concerns about inflation are already beginning to drive interest rates up. For our partners, no time is better than now to help their homeowners who have been sitting on the fence due to the costs of a reverse mortgage” says Hild.

According to LWF, the base option for the fixed rate reverse mortgage at 4.99% includes no SFSA. If brokers choose to offer a SFSA, it will include YSP. For more information, see here.

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  • Lower rates are a good thing for consumers.

    That said, it seems a bit strange to use a 20 year time horizon for interest savings when the life expectancy for a 70 year old is just 13-16 years and typical HECM loans have an even shorter lifespan.

    • I guess it goes without saying that the interest savings over the shorter, typical duration are not nearly as compelling. Bottom line: lowering the accrual rate below the benefit 'floor' of 5.56% provides good press but nominal real benefit.

      • Jim,

        That really is not the case but the longer term does exaggerate the savings to the uttermost. For example, if the HECM principal limit were $186,000 and there was no servicing fee set aside, at a note rate of 4.99% the balance due would grow to about $272,918 at the end of 7 years; while at a note rate of 5.56%, the balance due on the same loan would be $283,973. So there are dramatic savings in most cases.

        The trouble with the example is that it is plain and simple too extreme with no clarification as to the comparison, hardly the mark of a responsible lender who went through the latest mortgage/housing crisis. Live Well knows better than this. I repeat this announcement is a poor example and a big disappointment.

      • Point taken, but the savings of <4% over the typical 7-year period falls within my definition of “nominal” when making a decision on the selection of a HECM program/lender.

      • Jim,

        You also have a great point but most seniors I deal with would jump at a way to save accrued interest of $11,000 over a 7 year period.

  • What a disappointment!!! I guess several significant leaders in this industry just don't get it.

    The Truth-in-Lending rules REQUIRE that when one is saying that their product saves over $67,000 in comparison to some unnamed mortgage, at a minimum, there needs to be enough information provided so that the comparison can be verified. This is clearly a false claim when compared to the Financial Freedom 5.39% fixed rate HECM product which was announed by RMD on the 4th of this month. MetLife has at least two different fixed rates. What standard fixed rate is Living Well referring to?

    John Lunde is correct to question the reasonableness of the length of the loan (which seems to violate at least the spirit of TILA). These incomplete and inappropriate examples once again make our industry look like we do not realize that we actually are part of the mortgage industry and need to be careful not to promote our products inappropriately. We must avoid the subprime and Alt-A image at all costs; this announcement is not a great example from an industry which already has an image barrier to overcome.

    You would think the NMLS exam and related course prep would have made us more aware of and sensitive to our responsibilities but even the Financial Freedom RMD announcement was somewhat suspect. We must be careful and avoid the advertising ploys that were used in the subprime era and were filled with inaccuracies and hype. It would have been so easy to have made this announcement right, responsibly, and full of good news. Living Well chose another way.

    We can do better, much better —- AND we must!!!!

  • Live Well Financial appreciates contributor feedback but nonetheless is surprised by some of the negative comments to a product offering that we consider a substantial improvement for senior homeowners in an environment with both significant short-term and long-term interest rate risk.

    In February, 98% of Wholesale HECM fixed rate endorsements has an interest rate of 5.56% or higher. We compared that “industry standard” product against our new 4.99% fixed rate.

    We understand the comments regarding longevity but disagree with indications that this product is not compelling or that the information is inaccurate. Most people are unaware that a significant number of reverse mortgage customers refinanced out of their reverse mortgages into subprime cash out refinances during the early part of this decade. This worked to reduce HECM loan lives significantly. It goes without saying that this was a terrible decision for these seniors as they are now losing their homes to foreclosure in record numbers because they cannot afford the payments on their subprime loans. With no subprime cash out refinances available to seniors anymore (thank goodness), increased longevity, and earlier expected adoption of reverse mortgages by baby boomers, we expect materially longer loan lives than what has been seen in the past. We are already seeing evidence of this increased loan life with the HECM loans we service.

    We have included additional projections for our 70-year-old borrower and a 62-year-old baby boomer.

    HECM ($300K MCA; Closing Costs (excl. MIP) = 3% of MCA; $0 MSF; 100% Cash Draw)

    By Age: Principal Balance After X Years

    Borrower Age 62
    4.99% 5.56% Savings
    5 $221,717 $228,095 $6,378
    10 $281,569 $308,587 $17,018
    15 $383,427 $417,482 $34,055
    20 $556,263 $623,093 $60,578
    25 $663,082 $764,113 $101,031

    Borrower Age 70
    4.99% 5.56% Savings
    5 $244,599 $251,636 $7,037
    10 $321,659 $340,434 $18,775
    15 $422,998 $460,567 $37,569
    20 $556,263 $623,093 $66,830
    25 $731,514 $842,972 $111,458

    For certain types of borrowers, HECM loan lives could in some circumstances surpass 25 years. We certainly don’t expect all customers to be in their HECMs for this long, or even the average customer’s loan to last that long. However, there are many seniors who do expect that type of longevity (plus HUD requires that information on HECM amortization schedules). These are the seniors who we hope the 4.99% product will bring into the market for consideration of the HECM program. For these baby boomers, the 4.99% interest rate product has significant savings. The math speaks for itself and only time will dictate whether or not it helps our industry.

    It is oLive Well Financial appreciates contributor feedback but nonetheless is surprised by some of the negative comments to a product offering that we consider a substantial improvement for senior homeowners in an environment with both significant short-term and long-term interest rate risk.

    In February, 98% of Wholesale HECM fixed rate endorsements has an interest rate of 5.56% or higher. We compared that “industry standard” product against our new 4.99% fixed rate.

    We understand the comments regarding longevity but disagree with indications that this product is not compelling or that the information is inaccurate. Most people are unaware that a significant number of reverse mortgage customers refinanced out of their reverse mortgages into subprime cash out refinances during the early part of this decade. This worked to reduce HECM loan lives significantly. It goes without saying that this was a terrible decision for these seniors as they are now losing their homes to foreclosure in record numbers because they cannot afford the payments on their subprime loans. With no subprime cash out refinances available to seniors anymore (thank goodness), increased longevity, and earlier expected adoption of reverse mortgages by baby boomers, we expect materially longer loan lives than what has been seen in the past. We are already seeing evidence of this increased loan life with the HECM loans we currently service.

    To provide additional numerical scenarios, we have included additional projections for our 70-year-old borrower and a 62-year-old baby boomer.

    HECM ($300K MCA; Closing Costs (excl. MIP) =3% of MCA; $0 MSF; 100% Cash Draw)

    By Age: Principal Balance After X Years

    Borrower Age 62
    4.99% 5.56% Savings
    5 $221,717 $228,095 $6,378
    10 $281,569 $308,587 $17,018
    15 $383,427 $417,482 $34,055
    20 $556,263 $623,093 $60,578
    25 $663,082 $764,113 $101,031

    Borrower Age 70
    4.99% 5.56% Savings
    5 $244,599 $251,636 $7,037
    10 $321,659 $340,434 $18,775
    15 $422,998 $460,567 $37,569
    20 $556,263 $623,093 $66,830
    25 $731,514 $842,972 $111,458

    For certain types of borrowers, HECM loan lives could in some circumstances surpass 25 years. We certainly don’t expect all customers to be in their HECMs for this long, or even the average customer’s loan to last that long. However, there are many seniors who do expect that type of longevity (plus HUD requires that information on HECM amortization schedules). These are the seniors who we hope the 4.99% product will bring into the market for consideration of the HECM program. For these baby boomers, the 4.99% interest rate product has significant savings. The math speaks for itself and only time will dictate whether or not it helps our industry. It is our intent to help this industry, by continuing to bring products like this to the market to increase the benefits and reduce the costs for seniors and their families.

    Our intention to help this industry, by continuing to bring products like this to the market to increase the benefits and reduce the costs for seniors and their families.

    • It is good to see this response. It verifies what criticisms were made but at the same strongly asserts why those criticisms were not relevant to the considerations of Live Well management.

      However, the only significant issues related to the present HECM fixed rate product as to the ultimate balance due are 1) the principal limit at time of funding, 2) the monthly servicing fee amount, 3) the note rate, and 4) the length of the loan. All other information is superfluous.

      All in all, a very good response. We appreciate your clarification.

  • Point taken, but the savings of <4% over the typical 7-year period falls within my definition of “nominal” when making a decision on the selection of a HECM program/lender.

  • It is good to see this response. It verifies what criticisms were made but at the same strongly asserts why those criticisms were not relevant to the considerations of Live Well management.rnrnHowever, the only significant issues related to the present HECM fixed rate product as to the ultimate balance due are 1) the principal limit at time of funding, 2) the monthly servicing fee amount, 3) the note rate, and 4) the length of the loan. All other information is superfluous.rnrnAll in all, a very good response. We appreciate your clarification.rn

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