HECM Saver: The Impact of FHA’s New Reverse Mortgage Program

The Department of Housing and Urban Development is expected to roll out the HECM Saver in the coming weeks, no one knows what sort of impact the HECM Saver will have on the marketplace.

Designed to address one of the biggest complaints of reverse mortgages, the HECM Saver offers borrowers less money at a lower cost.

When it’s rolled out, the product will reportedly have a 0.01% upfront mortgage insurance premium and 1.25% annual MIP.  Much lower than the 2% upfront MIP and 1.25% annual MIP charged to HECM Standard borrowers. In theory, lowering the upfront costs should expand the number of reverse mortgages borrowers, but the industry isn’t so sure.

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According to a poll of over 200 RMD readers, 36% of respondents said the HECM saver will boost reverse mortgage volume, while 44% are unsure.  Only 20% said the product will not increase reverse mortgage volume.

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With reverse mortgage volume down 40% during FY 2010, lenders hope the product will reach new customers.

“We are looking forward to introducing a new product that will broaden the marketplace,” said Jeff Lewis, Chairman of Generation Mortgage.

In order to do that, the industry will need to move away from its “bread and butter” – a consumer looking to pay off a large mortgage balance – so a shift in who the product is marketed to is likely.

Those behind the development of the HECM Saver hope it will reach consumers with low or no mortgage balance, who traditionally turn to a HELOC for smaller financing needs.  This has always been a consumer the industry has wanted to reach, but the upfront costs of the traditional HECM made it incredibly difficult.

HECM Saver Economics

The economics of offering the HECM Saver pose challenges to reverse mortgage lenders, especially smaller brokers.  With smaller loan amounts, lenders will see less revenue per transaction compared to to the traditional HECM product. Meaning, don’t expect traditional HECM Fixed premiums for the HECM Saver.

“This would seem to move the industry further away from the individual loan officer as center of gravity,” said John Lunde, President of Reverse Market Insight. Thus, providing “additional advantages to call center and online models that can scale affinity partnerships with financial and non-financial institutions that don’t desire to directly enter the business.”

If the HECM Saver doesn’t see much in terms of volume, Lunde said it could become a relationship product offered by banks and other financial institutions.

“They have funding capacity and can afford to earn incremental revenues from the product over time as draws occur, rather than current period income needs of brokers and primarily transaction oriented organizations,” he said.

While no one knows when the “official announcement” from HUD is coming, it could take some time before the industry sees how the HECM Saver plays out.

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  • The early success of a product has much to do with its reception by the industry. Long-term the success of a product has more to do with the product itself and how well it is received by the market segment for which it is designed.rnrnAs a sales force, there is no clear picture of who our targeted market is. While it is being termed as an alternative to HELOCs, a product for those with lower mortgage balances, and of course, a product for those looking for lower upfront costs, all of those descriptions seem very superficial. There is an old adage which declares people without a vision perish. A very shallow application of this proverb is that a sales force with no well defined market is doomed to a slow ramp up in sales.rnrnOne problem with product design of the HECM Saver is that it seems to answer the basic complaint that many seniors see the present HECM products as too expensive upfront. It does not seem directed to a specific market segment. Even though this is backwards, it is now up to the industry to analyze the market and define the market segment which will most benefit from HECM Savers.rnrnUntil a mortgagee letter is released, it is perfectly all right to be in this position. I just hope we will not be in this same situation five years from now.rn

  • Most of the HECMs I do are zero cost – no MIP, no origination fee, no other closing costs and no service fee set aside. I cant’ see any advantage with their HECM Saver product. If HUD could make the application less than 170 pages, lower the appraisal cost by eliminating the AMC, and get the Coop product to market, they could make a meaningful difference for the Seniors.

  • It seems to me that the advantage of the HECM Saver program is only with an adjustable rate loan. There is no reason to use this for the fixed rate. As Mr Reverse states, these loans already have lowered closing costs. I have a few clients who have their homes paid off and don’t need a lot of money but would like to get a little safety net. These clients are put off by the closing costs of an adjustable rate HECM but don’t want to take all their cash out with the fixed rate. nnI will try to sell them on this loan when we get more information on it.

  • It is interesting to see the industry so undecided about the new product. My feeling is that is just another government idea that is lacking on market knowledge. I suppose time will tell.

  • mrreverse,rnrnThere is no such thing as a “zero cost” HECM, unless no interest or ongoing MIP are accruing. Lately some ads have been appearing on the Internet with this same misstatement attributed to at least one nationally chartered lender. This is the principal reason why all originators should have to be subject to the same NMLS testing and licensing requirements. None should be exempted.rnrnWhen such misstatements are being promoted by prominent lenders, it makes such statements look intentional. Why are we shooting ourselves in the foot? Where is compliance? If there are no upfront costs, then call it what it is, a “zero upfront cost” HECM.rnrnPerhaps the right thing to do in the case where a zero upfront cost HECM Fixed Rate Standard is being offered is to offer the same product as a zero upfront cost HECM Fixed Rate Saver with a lower note interest rate.rn

  • How do you do it with no costs at all? I understand using the YSP to offset the costs, but the UFMIP and the origination fee use up 4% of any YSP. Do you do them for free?

  • How can you originate a reverse without any costs, including the UFMIP? I understand using the YSP to offset the origination fee and the other costs, but there is not enough YSP to cover everything. How do you do it, Mr Revers?

  • The “hidden” message behind the comment about smaller brokers should also include some unscrupulous banking agents as well. The fixed rate HECM pays so much to the bank and LO that the HECM Saver will look like a discount product- you won’t see too many broker shops selling something they aren’t making a killing on. This Saver program has amazing potential in banks where an older clientele may not want to have monthly payments like the HELOC carries or maybe the LOC on their current HELOC has been suspended or curtailed.

  • The early success of a product has much to do with its reception by the industry. Long-term the success of a product has more to do with the product itself and how well it is received by the market segment for which it is designed.rnrnAs a sales force, there is no clear picture of who our targeted market is. While it is being termed as an alternative to HELOCs, a product for those with lower mortgage balances, and of course, a product for those looking for lower upfront costs, all of those descriptions seem very superficial. There is an old adage which declares people without a vision perish. A very shallow application of this proverb is that a sales force with no well defined market is doomed to a slow ramp up in sales.rnrnOne problem with product design of the HECM Saver is that it seems to answer the basic complaint that many seniors see the present HECM products as too expensive upfront. It does not seem directed to a specific market segment. Even though this is backwards, it is now up to the industry to analyze the market and define the market segment which will most benefit from HECM Savers.rnrnUntil a mortgagee letter is released, it is perfectly all right to be in this position. I just hope we will not be in this same situation five years from now.rn

  • Most of the HECMs I do are zero cost – no MIP, no origination fee, no other closing costs and no service fee set aside. I cant’ see any advantage with their HECM Saver product. If HUD could make the application less than 170 pages, lower the appraisal cost by eliminating the AMC, and get the Coop product to market, they could make a meaningful difference for the Seniors.

  • It seems to me that the advantage of the HECM Saver program is only with an adjustable rate loan. There is no reason to use this for the fixed rate. As Mr Reverse states, these loans already have lowered closing costs. I have a few clients who have their homes paid off and don’t need a lot of money but would like to get a little safety net. These clients are put off by the closing costs of an adjustable rate HECM but don’t want to take all their cash out with the fixed rate. nnI will try to sell them on this loan when we get more information on it.

  • It is interesting to see the industry so undecided about the new product. My feeling is that is just another government idea that is lacking on market knowledge. I suppose time will tell.

  • mrreverse,rnrnThere is no such thing as a “zero cost” HECM, unless no interest or ongoing MIP are accruing. Lately some ads have been appearing on the Internet with this same misstatement attributed to at least one nationally chartered lender. This is the principal reason why all originators should have to be subject to the same NMLS testing and licensing requirements. None should be exempted.rnrnWhen such misstatements are being promoted by prominent lenders, it makes such statements look intentional. Why are we shooting ourselves in the foot? Where is compliance? If there are no upfront costs, then call it what it is, a “zero upfront cost” HECM.rnrnPerhaps the right thing to do in the case where a zero upfront cost HECM Fixed Rate Standard is being offered is to offer the same product as a zero upfront cost HECM Fixed Rate Saver with a lower note interest rate.rn

  • How do you do it with no costs at all? I understand using the YSP to offset the costs, but the UFMIP and the origination fee use up 4% of any YSP. Do you do them for free?

  • How can you originate a reverse without any costs, including the UFMIP? I understand using the YSP to offset the origination fee and the other costs, but there is not enough YSP to cover everything. How do you do it, Mr Revers?

  • The “hidden” message behind the comment about smaller brokers should also include some unscrupulous banking agents as well. The fixed rate HECM pays so much to the bank and LO that the HECM Saver will look like a discount product- you won’t see too many broker shops selling something they aren’t making a killing on. This Saver program has amazing potential in banks where an older clientele may not want to have monthly payments like the HELOC carries or maybe the LOC on their current HELOC has been suspended or curtailed.

  • The early success of a product has much to do with its reception by the industry. Long-term the success of a product has more to do with the product itself and how well it is received by the market segment for which it is designed.rnrnAs a sales force, there is no clear picture of who our targeted market is. While it is being termed as an alternative to HELOCs, a product for those with lower mortgage balances, and of course, a product for those looking for lower upfront costs, all of those descriptions seem very superficial. There is an old adage which declares people without a vision perish. A very shallow application of this proverb is that a sales force with no well defined market is doomed to a slow ramp up in sales.rnrnOne problem with product design of the HECM Saver is that it seems to answer the basic complaint that many seniors see the present HECM products as too expensive upfront. It does not seem directed to a specific market segment. Even though this is backwards, it is now up to the industry to analyze the market and define the market segment which will most benefit from HECM Savers.rnrnUntil a mortgagee letter is released, it is perfectly all right to be in this position. I just hope we will not be in this same situation five years from now.rn

  • Most of the HECMs I do are zero cost – no MIP, no origination fee, no other closing costs and no service fee set aside. I cant’ see any advantage with their HECM Saver product. If HUD could make the application less than 170 pages, lower the appraisal cost by eliminating the AMC, and get the Coop product to market, they could make a meaningful difference for the Seniors.

  • It seems to me that the advantage of the HECM Saver program is only with an adjustable rate loan. There is no reason to use this for the fixed rate. As Mr Reverse states, these loans already have lowered closing costs. I have a few clients who have their homes paid off and don’t need a lot of money but would like to get a little safety net. These clients are put off by the closing costs of an adjustable rate HECM but don’t want to take all their cash out with the fixed rate. nnI will try to sell them on this loan when we get more information on it.

  • It is interesting to see the industry so undecided about the new product. My feeling is that is just another government idea that is lacking on market knowledge. I suppose time will tell.

  • mrreverse,rnrnThere is no such thing as a “zero cost” HECM, unless no interest or ongoing MIP are accruing. Lately some ads have been appearing on the Internet with this same misstatement attributed to at least one nationally chartered lender. This is the principal reason why all originators should have to be subject to the same NMLS testing and licensing requirements. None should be exempted.rnrnWhen such misstatements are being promoted by prominent lenders, it makes such statements look intentional. Why are we shooting ourselves in the foot? Where is compliance? If there are no upfront costs, then call it what it is, a “zero upfront cost” HECM.rnrnPerhaps the right thing to do in the case where a zero upfront cost HECM Fixed Rate Standard is being offered is to offer the same product as a zero upfront cost HECM Fixed Rate Saver with a lower note interest rate.rn

  • How do you do it with no costs at all? I understand using the YSP to offset the costs, but the UFMIP and the origination fee use up 4% of any YSP. Do you do them for free?

  • How can you originate a reverse without any costs, including the UFMIP? I understand using the YSP to offset the origination fee and the other costs, but there is not enough YSP to cover everything. How do you do it, Mr Revers?

  • It seems to me that the advantage of the HECM Saver program is only with an adjustable rate loan. There is no reason to use this for the fixed rate. As Mr Reverse states, these loans already have lowered closing costs. I have a few clients who have their homes paid off and don’t need a lot of money but would like to get a little safety net. These clients are put off by the closing costs of an adjustable rate HECM but don’t want to take all their cash out with the fixed rate. nnI will try to sell them on this loan when we get more information on it.

  • The “hidden” message behind the comment about smaller brokers should also include some unscrupulous banking agents as well. The fixed rate HECM pays so much to the bank and LO that the HECM Saver will look like a discount product- you won’t see too many broker shops selling something they aren’t making a killing on. This Saver program has amazing potential in banks where an older clientele may not want to have monthly payments like the HELOC carries or maybe the LOC on their current HELOC has been suspended or curtailed.

  • The early success of a product has much to do with its reception by the industry. Long-term the success of a product has more to do with the product itself and how well it is received by the market segment for which it is designed.rnrnAs a sales force, there is no clear picture of who our targeted market is. While it is being termed as an alternative to HELOCs, a product for those with lower mortgage balances, and of course, a product for those looking for lower upfront costs, all of those descriptions seem very superficial. There is an old adage which declares people without a vision perish. A very shallow application of this proverb is that a sales force with no well defined market is doomed to a slow ramp up in sales.rnrnOne problem with product design of the HECM Saver is that it seems to answer the basic complaint that many seniors see the present HECM products as too expensive upfront. It does not seem directed to a specific market segment. Even though this is backwards, it is now up to the industry to analyze the market and define the market segment which will most benefit from HECM Savers.rnrnUntil a mortgagee letter is released, it is perfectly all right to be in this position. I just hope we will not be in this same situation five years from now.rn

  • It is interesting to see the industry so undecided about the new product. My feeling is that is just another government idea that is lacking on market knowledge. I suppose time will tell.

  • Most of the HECMs I do are zero cost – no MIP, no origination fee, no other closing costs and no service fee set aside. I cant’ see any advantage with their HECM Saver product. If HUD could make the application less than 170 pages, lower the appraisal cost by eliminating the AMC, and get the Coop product to market, they could make a meaningful difference for the Seniors.

  • mrreverse,rnrnThere is no such thing as a “zero cost” HECM, unless no interest or ongoing MIP are accruing. Lately some ads have been appearing on the Internet with this same misstatement attributed to at least one nationally chartered lender. This is the principal reason why all originators should have to be subject to the same NMLS testing and licensing requirements. None should be exempted.rnrnWhen such misstatements are being promoted by prominent lenders, it makes such statements look intentional. Why are we shooting ourselves in the foot? Where is compliance? If there are no upfront costs, then call it what it is, a “zero upfront cost” HECM.rnrnPerhaps the right thing to do in the case where a zero upfront cost HECM Fixed Rate Standard is being offered is to offer the same product as a zero upfront cost HECM Fixed Rate Saver with a lower note interest rate.rn

  • How do you do it with no costs at all? I understand using the YSP to offset the costs, but the UFMIP and the origination fee use up 4% of any YSP. Do you do them for free?

  • How can you originate a reverse without any costs, including the UFMIP? I understand using the YSP to offset the origination fee and the other costs, but there is not enough YSP to cover everything. How do you do it, Mr Revers?

  • The “hidden” message behind the comment about smaller brokers should also include some unscrupulous banking agents as well. The fixed rate HECM pays so much to the bank and LO that the HECM Saver will look like a discount product- you won’t see too many broker shops selling something they aren’t making a killing on. This Saver program has amazing potential in banks where an older clientele may not want to have monthly payments like the HELOC carries or maybe the LOC on their current HELOC has been suspended or curtailed.

  • The early success of a product has much to do with its reception by the industry. Long-term the success of a product has more to do with the product itself and how well it is received by the market segment for which it is designed.rnrnAs a sales force, there is no clear picture of who our targeted market is. While it is being termed as an alternative to HELOCs, a product for those with lower mortgage balances, and of course, a product for those looking for lower upfront costs, all of those descriptions seem very superficial. There is an old adage which declares people without a vision perish. A very shallow application of this proverb is that a sales force with no well defined market is doomed to a slow ramp up in sales.rnrnOne problem with product design of the HECM Saver is that it seems to answer the basic complaint that many seniors see the present HECM products as too expensive upfront. It does not seem directed to a specific market segment. Even though this is backwards, it is now up to the industry to analyze the market and define the market segment which will most benefit from HECM Savers.rnrnUntil a mortgagee letter is released, it is perfectly all right to be in this position. I just hope we will not be in this same situation five years from now.rn

  • Most of the HECMs I do are zero cost – no MIP, no origination fee, no other closing costs and no service fee set aside. I cant’ see any advantage with their HECM Saver product. If HUD could make the application less than 170 pages, lower the appraisal cost by eliminating the AMC, and get the Coop product to market, they could make a meaningful difference for the Seniors.

  • It seems to me that the advantage of the HECM Saver program is only with an adjustable rate loan. There is no reason to use this for the fixed rate. As Mr Reverse states, these loans already have lowered closing costs. I have a few clients who have their homes paid off and don’t need a lot of money but would like to get a little safety net. These clients are put off by the closing costs of an adjustable rate HECM but don’t want to take all their cash out with the fixed rate. nnI will try to sell them on this loan when we get more information on it.

  • It is interesting to see the industry so undecided about the new product. My feeling is that is just another government idea that is lacking on market knowledge. I suppose time will tell.

  • mrreverse,rnrnThere is no such thing as a “zero cost” HECM, unless no interest or ongoing MIP are accruing. Lately some ads have been appearing on the Internet with this same misstatement attributed to at least one nationally chartered lender. This is the principal reason why all originators should have to be subject to the same NMLS testing and licensing requirements. None should be exempted.rnrnWhen such misstatements are being promoted by prominent lenders, it makes such statements look intentional. Why are we shooting ourselves in the foot? Where is compliance? If there are no upfront costs, then call it what it is, a “zero upfront cost” HECM.rnrnPerhaps the right thing to do in the case where a zero upfront cost HECM Fixed Rate Standard is being offered is to offer the same product as a zero upfront cost HECM Fixed Rate Saver with a lower note interest rate.rn

  • How do you do it with no costs at all? I understand using the YSP to offset the costs, but the UFMIP and the origination fee use up 4% of any YSP. Do you do them for free?

  • How can you originate a reverse without any costs, including the UFMIP? I understand using the YSP to offset the origination fee and the other costs, but there is not enough YSP to cover everything. How do you do it, Mr Revers?

  • The “hidden” message behind the comment about smaller brokers should also include some unscrupulous banking agents as well. The fixed rate HECM pays so much to the bank and LO that the HECM Saver will look like a discount product- you won’t see too many broker shops selling something they aren’t making a killing on. This Saver program has amazing potential in banks where an older clientele may not want to have monthly payments like the HELOC carries or maybe the LOC on their current HELOC has been suspended or curtailed.

  • The early success of a product has much to do with its reception by the industry. Long-term the success of a product has more to do with the product itself and how well it is received by the market segment for which it is designed.rnrnAs a sales force, there is no clear picture of who our targeted market is. While it is being termed as an alternative to HELOCs, a product for those with lower mortgage balances, and of course, a product for those looking for lower upfront costs, all of those descriptions seem very superficial. There is an old adage which declares people without a vision perish. A very shallow application of this proverb is that a sales force with no well defined market is doomed to a slow ramp up in sales.rnrnOne problem with product design of the HECM Saver is that it seems to answer the basic complaint that many seniors see the present HECM products as too expensive upfront. It does not seem directed to a specific market segment. Even though this is backwards, it is now up to the industry to analyze the market and define the market segment which will most benefit from HECM Savers.rnrnUntil a mortgagee letter is released, it is perfectly all right to be in this position. I just hope we will not be in this same situation five years from now.rn

  • Most of the HECMs I do are zero cost – no MIP, no origination fee, no other closing costs and no service fee set aside. I cant’ see any advantage with their HECM Saver product. If HUD could make the application less than 170 pages, lower the appraisal cost by eliminating the AMC, and get the Coop product to market, they could make a meaningful difference for the Seniors.

  • Most of the HECMs I do are zero cost – no MIP, no origination fee, no other closing costs and no service fee set aside. I cant’ see any advantage with their HECM Saver product. If HUD could make the application less than 170 pages, lower the appraisal cost by eliminating the AMC, and get the Coop product to market, they could make a meaningful difference for the Seniors.

    • How do you do it with no costs at all? I understand using the YSP to offset the costs, but the UFMIP and the origination fee use up 4% of any YSP. Do you do them for free?

    • mrreverse,rnrnThere is no such thing as a “zero cost” HECM, unless no interest or ongoing MIP are accruing. Lately some ads have been appearing on the Internet with this same misstatement attributed to at least one nationally chartered lender. This is the principal reason why all originators should have to be subject to the same NMLS testing and licensing requirements. None should be exempted.rnrnWhen such misstatements are being promoted by prominent lenders, it makes such statements look intentional. Why are we shooting ourselves in the foot? Where is compliance? If there are no upfront costs, then call it what it is, a “zero upfront cost” HECM.rnrnPerhaps the right thing to do in the case where a zero upfront cost HECM Fixed Rate Standard is being offered is to offer the same product as a zero upfront cost HECM Fixed Rate Saver with a lower note interest rate.rn

  • The early success of a product has much to do with its reception by the industry. Long-term the success of a product has more to do with the product itself and how well it is received by the market segment for which it is designed.rnrnAs a sales force, there is no clear picture of who our targeted market is. While it is being termed as an alternative to HELOCs, a product for those with lower mortgage balances, and of course, a product for those looking for lower upfront costs, all of those descriptions seem very superficial. There is an old adage which declares people without a vision perish. A very shallow application of this proverb is that a sales force with no well defined market is doomed to a slow ramp up in sales.rnrnOne problem with product design of the HECM Saver is that it seems to answer the basic complaint that many seniors see the present HECM products as too expensive upfront. It does not seem directed to a specific market segment. Even though this is backwards, it is now up to the industry to analyze the market and define the market segment which will most benefit from HECM Savers.rnrnUntil a mortgagee letter is released, it is perfectly all right to be in this position. I just hope we will not be in this same situation five years from now.rn

  • The “hidden” message behind the comment about smaller brokers should also include some unscrupulous banking agents as well. The fixed rate HECM pays so much to the bank and LO that the HECM Saver will look like a discount product- you won’t see too many broker shops selling something they aren’t making a killing on. This Saver program has amazing potential in banks where an older clientele may not want to have monthly payments like the HELOC carries or maybe the LOC on their current HELOC has been suspended or curtailed.

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