HECM Changes Will Create a Little Uncertainty in Short Term says Lewis

NewImage.jpgWhile it’s too early to know how the market will react to the HECM Saver, it’s certainly good news for reverse mortgage borrowers.

In response to market demand, the Federal Housing Administration said it modified its reverse mortgage products to meet the needs of consumers.  The new Saver and the HECM Standard provide consumers the needed flexibility and financially beneficial options for utilizing their home equity as part of their financial planning.

However, Jeff Lewis, Chairman of Generation Mortgage, told Mortgage Servicing News that the changes will create “a little bit of uncertainty in the short term in the marketplace.”  While the Ginnie Mae HMBS market has already determined market clearing levels for the securities, the new products also require the market to find a level on each of them.

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Lewis does expect to see “a lot of borrower activity” right away, which is why he said the industry has to get “the capital markets side of it straight as fast as possible.”

According to Lewis “there’s a couple of negatives to be aware of.” The ongoing mortgage insurance premium or MIT all borrowers pay each year to FHA will change from half a point to 1.25 points so the net effect is that what the borrowers will pay will be higher.

So far pricing for the HECM Saver is better than originally expected.  Some companies have come out stronger than others, but it’s to soon to tell where pricing will end up.

Insiders Review New HECM Changes’ Benefits and Concerns

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  • Jeff did great but the article was a touch on the zany side. But it was not on the negative side.

    For example, talking about getting things exactly backwards, the article states: “The benefit is twofold, according to the FHA, because the HECM standard gives homeowners the option to borrow a smaller amount and ‘substantially’ lowers risk to the FHA insurance fund because this principal limit is reduced.”

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