After the initial roll out of the HECM Saver, Vick Bott, Deputy Assistant Secretary for the Department of Housing and Urban Development said the agency would like to see it represent a minimum of 30 percent of all reverse mortgages it insures.
Released earlier this month, the product provides consumers with less in proceeds but at a much lower cost compared to the traditional Standard HECM.
During an interview with Reverse Fortunes, Bott said the decision to develop the HECM Saver was two fold. First, even before she joined HUD, the market had been asking for a low cost product that didn’t require borrowers to leverage all the equity in their home. Second, when the Obama Administration released its FY 2011 budget, the program was reported to need a $150 million subsidy to break even for the year.
The creation of the Saver product will address the needs of the marketplace and have a positive net effect on the ongoing risk association with the traditional product. “It’s important that the industry provides seniors the Saver product because it subsidizes the standard product,” she said.
In recent years, data from the Department of Housing and Urban Development shows the average reverse mortgage borrower is getting younger and Bott said the HECM Saver is likely to appeal to this group of seniors. “It absolutely trends towards the younger senior, someone looking to supplement money that they lost in the stock market,” she said.
Even with all this potential, Bott admits it could take some time for the industry to fully adopt the new product, but the agency hopes to get a better idea about where volume will end up by January or February. “We certainly know the demand is there,” she said.