FHA Commissioner Says HECM Saver is Major New Product

Federal Housing Administration Commissioner David Stevens outlined the new reverse mortgage programs released by the administration in his monthly letter published to the industry.

Describing the HECM Saver as a “major” new product for reverse mortgages, the loan “gives seniors a new option for accessing their home’s equity to pay for health care costs, home repairs and other needs,” he said.

According to the Commissioner, the product was developed after senior citizens expressed concerns about the upfront fees being too high.  “In response, we created this new product which will provide seniors with another reverse mortgage option that significantly lowers costs by almost eliminating the upfront Mortgage Insurance Premium that is required under the standard HECM option,” said Stevens.

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The new product enables seniors to borrow a smaller amount than would be available with a HECM Standard loan.  Unlike the Standard, the Saver has an upfront premium of only .01 percent of the property’s value, much less compared to the HECM Standard’s two percent upfront premium.

“Borrowers will receive approximately 10 to 18 percent less proceeds under the HECM Saver option than they would receive under HECM Standard, which lowers the risk to the FHA insurance fund.”

Read a copy of the letter here.

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  • As ususal Mr. Stevens does not address market realities. If the Saver is only being offered at higher expected interest rates than Standards and the expected interest rate on the Saver is above 5.06%, then the pat “10% to 18%” lower proceeds is a misleading presentation of the true situation of the Saver in the market place. Mr. Stevens presentation is that of someone who is in an ivory tower.

    • wealthone,

      Lenders are not required to offer Savers at the same interest rates as Standards. Some have been offering them with slightly higher fixed rates or on adjustables with slightly higher margins.

  • There are lenders offering it at a 5.04% expected rate. I had a client choose this as the best option for him today, even though the fixed rate offered lower closing costs.

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