HECM Saver “Opens New Options” for Seniors

Several months after the FHA’s launch of its new HECM Saver mortgage insurance premium option, the Washington Post reported on its appeal of the Saver in offering a much lower startup cost than that of traditional reverse mortgages.

“It opens up new options for people to think about in terms of how they tap their equity as a retirement resource,” Barbara Stucki, vice president of home equity initiatives at the National Council on Aging, told The Post. Rolled out in October 2010, the Saver allows borrowers to spend much less in startup fees. On the flip side, the total amount that can be borrowed is less. With the Saver, the borrower will pay .01 percent of the home’s value in upfront insurance premiums, just a fraction of the 2 percent he or she would spend on traditional reverse mortgage premiums.

Depending on the borrower’s age, the total amount that can be borrowed is between 10 percent and 18 percent less than under a traditional HECM.

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Additionally, many private lenders have lowered or completely waived origination fees, Peter Bell, president of the National Reverse Mortgage Lenders Association told The Post. This is due to the premium investors are paying for reverse mortgage-backed securities, he explained.

Read the full article here.

Written by Elizabeth Ecker

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  • “Susanna Montezemolo, a vice president with the Center for Responsible Lending, … pointed out that elderly homeowners who suddenly have a large pool of money can be targeted by salespeople selling potentially unsuitable financial products, such as deferred annuities.”

    Then Susanna is quoted as saying that reverse mortgages are “… an option for someone who is cash-poor but equity-rich and can’t meet living expenses….” And that is what she says when the article is titled: “’Saver’ reverse mortgage aims to cut start-up costs.”

    “Younger borrowers – in their mid-60s – have increasingly applied for reverse mortgages because they’ve lost their jobs in the recession. But Stucki said these borrowers may risk depleting their home equity. In addition, she pointed out, homeowners who delay using a reverse mortgage will get more money, because older homeowners can borrow larger amounts.”

    It seems that the senior advocates see reverse mortgages, even Savers, as little more than loans of last resort. Susanna does not seem to believe that counseling can effectively help seniors understand why deferred annuities are not a suitable investment for seniors. While she has a point, it is odd that she, in particular, brings it up.

    Then we have Dr. Stucki discussing a real problem for some younger seniors who need finances and telling them if they just waited…. It seems she believes that their financial situation is somehow optional.

    Despite new laws, new protocols, and a newer lower upfront cost HECM, the naysayers have yet to change their tune, even when they control counseling.

  • the problems of living longer and rising costs, is not going to go away.
    Of the 20% of people who are saving for retirement, 70% is less than 50000.
    Reverses mortgages and annunties will be the product of first choice for most… Senior advocates need to get there head out of the sand and realize that these programs are to help seniors not hurt them…

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