New FHA Hybrid Reverse Mortgage Might Be on the Horizon

There may be a future for a new Federal Housing Administration hybrid reverse mortgage product, according to statements made today by representatives for the National Reverse Mortgage Lenders Association at the group’s eastern regional meeting in New York City.

The potential comes after the NRMLA board held recent meetings in Washington, D.C. with White House economic policy staff, Peter Bell, NRMLA president and CEO told conference attendees.

“It was an exploratory meeting to see what they know about reverses and to feel out their interest. One outcome was we discussed the concept of working with [the Department of Housing and Urban Development] to develop a hybrid reverse mortgage,” Bell said.


The hybrid would combine an initial fixed rate option upfront with a variable rate for future draws on the loan.

“We feel this would be better for all concerned,” Bell said. “It would be better for consumers and better for the FHA fund.”

The reception was positive, he said, with a considerable degree of interest for pursuing the new product idea at the White House, which could work in turn with HUD to develop the product.

The Saver reverse mortgage, developed by HUD and launched in late 2010, is an example of a similar product developed as an alternative to the “standard” reverse mortgage products currently offered by FHA.

“The Saver is a model for what can be done,” said James Brodsky, legal counsel for NRMLA, noting the interest and enthusiasm from a presidential advisor as to how a new reverse mortgage product could fit into the administration’s plans.

Written by Elizabeth Ecker

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  • Back in early 2007, we floated this idea to the secondary market on a  proprietary product I proposed.  There was an overwhelming rejection of the idea at that time.

    Is the secondary market ready for this product?  Perhaps if it is insured by FHA.  It is about time a hybrid product is introduced.

    I hope that the percentage of each type in the hybrid is electable by the senior with the maximum available for fixed rate portion being no greater than the total taken at initial funding.  Upon funding, the election should be final.

    There are seniors have the expectation of paying down a percentage of the loan later in life and may want that portion as an adjustable rate product.

    Further this will relieve some of the strong and responsible criticism that we are seeing too many HECMs being originated today.  This will mean seniors who do not need proceeds currently do not have to take them.

    I supported the idea in early 2007 and do so again.

  • wealthone,

    As to your last paragraph, the problem is the risk is taken from the borrower and put on the note owner.  What you are talking about is nothing more than an accessible line of credit with a fixed rate product.  Why would any investor want it?

  • The secondary markets might get spooked again if HECM to HECM refis are allowed without adherence to the incremental benefit rules.  It might be useful to originators (and potentially borrowers) to allow this, but there should be a lot of thought given to rules governing this.

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