FHA Announces HECM Saver, New Low Cost Reverse Mortgage

The Department of Housing and Urban Development (HUD) officially released a new low cost reverse mortgage product for consumers on Tuesday.

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

“FHA designed HECM Saver as a second initial mortgage insurance premium (MIP) option for the purpose of lowering upfront loan closing costs, for mortgagors who want to borrow a smaller amount than what would be available with a HECM Standard,” said David Stevens, Assistant Secretary for HUD.

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According to HUD, the HECM Saver has 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.

The product is available for all transaction types and both a fixed rate and LIBOR or CMT based loan.  To view the principal limit factors, see here.

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  • Am I dreaming or did HUD just raise the prinicpal limits on the “standard” program from a base rate at age 62 from 56.2% to 61.9%?
    According to these charts the standard in 2009-2010 is 56.2% and the saver in 2010-2011 is 52.3% for a 62 year old with an expected rate of less than 5%.
    That means that on the adjustable rate with a margin of 1.75% the client would lose a net amount of 2% of their benefit but potentially save as much as 12k in closing costs.
    There is the matter of the monthly MIP, but overall this sounds like a win.

  • Forgive me for being pleased with ML 2010-34. It is generally better for younger borrowers than predicted.

    In a difficult economic time, NRMLA, NRMLA volunteer leadership, and HUD have worked hard to provide this result. As a member of this industry and an officer at Security One Lending, I want to express my gratitude to all involved.

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