Inman: Should FHA Get Out of Reverse Mortgages?

Reverse mortgages need to combine both federally-insured products and proprietary products, in order to allow a range of people to withdraw the equity in their homes, writes Inman News columnist Tom Kelly this week. Noting the recent exit of MetLife from the industry as well as the recent congressional hearing devoted to reverse mortgages, it has been a busy time for the industry he says. 

Tom Kelly writes:

…The only proprietary reverse mortgage now available is the Generation Plus Loan through Atlanta-based Generation Mortgage. It targets owners over the age of 62 with homes appraising between $500,000 and $6 million. Unlike the popular Home Equity Conversion Mortgage (HECM) offered by HUD, the jumbo reverse mortgage requires no mortgage insurance, but the interest rate on the program is higher.


The downside is that the Generation Plus loan carries a fixed rate of 7.78 or 8.78 percent, depending upon the program. All funds must be taken at closing and can be used for any purpose, including the purchase of an investment or retirement home at today’s bargain prices. A minimum FICO score of 700 is required.

A majority of seniors are better served by the HECM. Not only can customers receive the funds in a variety of ways (lump sum, monthly draw, line of credit, or a combination), but the interest rate on that fixed-rate product at press time was hovering at 4.25 percent, plus the upfront mortgage insurance premium.

In a nutshell, we need both FHA-insured and private reverse mortgages. Seniors love the idea of a government-backed instrument, and some need a way to tap their high-equity properties. Many have held on and stayed put. They deserve to take their money out, safely.

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Written by Elizabeth Ecker

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  • One problem for our industry right now is that no one is making the case for Savers with Congress or the public from the view of how they will help keep the HECM fund solvent. Rather than viewing them as endangering the MMI Fund, their value to that fund should be emphasized and highlighted.

    In fact homes securing Savers with appraised values in excess of $625,500 at the time of funding have the least potential of causing any harm to the HECM program. While many originators have no idea how Savers are beneficial to the program or who this product is designed to help, its proliferation is an important safeguard to the industry.

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