Bankrate: HECM Saver Makes Reverse Mortgages Affordable

NewImage.jpgBankrate is reporting that reverse mortgages are now affordable with the new HECM Saver product.

Peter Bell, president of the National Reverse Mortgage Lenders Association, a group in Washington, D.C., that represents lenders and investors in the reverse mortgage business says the new option empowers seniors to tap smaller amounts of equity in a more affordable way.

“Some changes from the market, from the regulatory side and in the counseling, have really improved the value proposition for a lot of seniors from what has been the traditional perception of reverse mortgages,” he says.

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While the adjustable rate product allows borrowers to take out smaller amounts of money initially, Susanna Montezemolo, vice president of federal affairs at the Center for Responsible Lending in Washington, D.C., says it may be a smarter choice because the fixed rate requires that the borrower tap the full amount of equity upfront.

“For the majority of people, it makes more sense to take out a minimum amount upfront and then have access to that line of credit, because they will owe less in interest over time,” she says.

To read the rest of the article, check out the link below.

Reverse mortgage gets affordable

 

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  • The statements from Peter Bell are the best I have read on the Saver. Peter remains one of the best spokespeople our industry has. I was surprised, however, at his quoted statement on the new interest floor: “…lenders can now use a minimum expected interest rate of 5 percent, instead of 5.5 percent, to calculate the maximum loan amount….” That is not quite as optional as the short quotation attributed to Peter makes it but who knows what else Peter said or even if the writer got the quotation right to begin with.

    Now as to the rest of the article, some is good and some … well you know.

    For example, the writer states: “Borrowers also pay an annual MIP of 1.25 percent of the loan amount on either the saver or standard option. On that same $250,000 house, this cost is $3,125 per year.” —————————
    Really? That is the value of the home times 1.25%, not the balance due times 1.25%. That means in two years, the borrower will have paid more than 2% of the value of the home just in ongoing MIP. Do editors even review the stories their reporters write? And this is Bankrate.com?

    I wish the maximum loan amount were the $625,000 that the reporter promotes. It seems as if the reporters from what should be industry “friendly” publications do not understand our product even after talking to Peter, Dr. Stucki, and Susanna. Why is anyone surprised that seniors sometimes get things mixed up after a decade or so?

    While I do not like how she was quoted above, Susanna Montezemolo does make good and healthy points about what type of interest rate product to choose, adjustable or fixed, in the actual article. The more I hear Susanna, the more I appreciate what she has to offer on the discussion of reverse mortgages although I do not always agree with her conclusions or more particularly those of her employer.

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