Boston Globe: “Significant Advantage” to HECM Saver Program

In response to the rising numbers of seniors taking out reverse mortgages to supplement their incomes, the Boston Globe ran an article written by correspondent Elliot Raphaelson that gives information on the options and costs associated with getting a reverse mortgage.

Raphaelson strongly recommends obtaining a reverse mortgage only through the Federal Housing Administration’s Home Equity Conversion Program, and also discusses the advantages of the HECM Saver program, with the benefits of its low insurance cost. The article details the basic costs accumulated when getting a reverse mortgage in addition to mortgage insurance, such as interest, potential origination fees, and closing costs.

The Globe also addresses the pros and cons for fixed-rate reverse mortgages versus those with adjustable rates. Raphaelson says that a fixed-rate mortgage may put homeowners at a disadvantage because they receive all the proceeds from their reverse mortgage in one lump sum, and interest begins accruing right away. In contrast, says Raphaelson, interest accrues on reverse ARMs depending on the appraised value of the home, regardless of the original loan amount.

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“An adjustable-rate mortgage provides more flexibility because you can access multiple lump sums, regular multiple payments, or a credit line,” he says. “However, the future rates of ARMs are unknown, and they can change monthly, possibly moving higher.”

Raphaelson cautions those considering a reverse mortgage that they will still need to maintain their homes, and pay real estate taxes and homeowner insurance.

Read the Boston Globe article.

Written by Alyssa Gerace

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  • Are you suggesting a Saver product with 1 bp of upfront MIP and 0 ongoing MIP?  Or would you rather have a Saver with 200 bps of upfront and 0 ongoing?

    FHA seems to only do insured products (otherwise how do they get paid for their guarantee risk), and I can’t imagine you’d be all that happy with the principal limits associated with a 1 bp upfront and 0 ongoing product.

    • John,

      If HUD also insured that product with even lower principal limit factors, that would be great but not at the price of replacing the Saver.  More products are always welcome.

      However, if the current Saver came with no ongoing MIP that would be ideal for originators and, of course, not so good for FHA.  As the old song goes:  “Wishin’ and hopin’.”

      What is not clear from the article is whether the writer believes the Saver has a zero ongoing MIP rate or not.  If he does think that, that is a great reason to strongly support Savers.  If he understands the product for what it is, his strong support is greatly appreciated.

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