Reverse Mortgage Funding is rolling out a new Home Equity Conversion Mortgage product to offer the “best of both worlds” to borrowers.
The new product, coined the “HECM Choice,” is a HECM reverse mortgage that is insured by the Federal Housing Administration. Like all HECMs, it adheres to HUD rules and regulations, but it opens possibilities for borrowers by allowing them to take a fixed rate reverse mortgage while accessing some of the proceeds upfront, and some subsequently—an option not offered under the standard product.
“For the first time, we’re offering a fixed rate loan with the option for the borrower to take only a portion of the money available at closing and still have access to the remaining principal limit,” said Craig Corn, CEO of Reverse Mortgage Funding. “Until now, all fixed rate HECM offerings have required borrowers to take all of the money up front in the form of a lump sum. Anyone wishing to take a partial draw had to choose a loan with an adjustable rate, which is not as appealing to many homeowners. HECM Choice provides improved cash flow while also satisfying the preference for a fixed rate product.”
The product launch is well timed, RMF says, given the recent product changes that went into effect in October. Those changes cut the amount accessible to borrowers and limited the amount a borrower can draw depending on his or her mandatory obligations.
“The industry has had time to digest the changes FHA implemented on September 30,” product manager Joe DeMarkey told RMD. “One of the biggest changes was the restriction on how much someone can borrow upfront or during the first 12 months. The HECM Choice offers the certainty of a fixed rate and access to the remaining principal limit without having to borrow it all upfront.”
RMF, which launched in August, is making the product available immediately to approved correspondents and will offer product training for brokers and principal agents December 19. The company plans to begin accepting HECM Choice loans for underwriting the in January, with a phased approach.
“We will be rolling out HECM Choice in phases,” said David Peskin, president of Reverse Mortgage Funding. “HECM Choice is immediately available for approved correspondent lenders, all of whom will receive training on HECM Choice over the next few weeks. Principal agents and brokers will have access to product training on December 19, and we expect to begin accepting loans for underwriting in January 2014. We believe this product will have a meaningful impact on the marketplace and feel a phased approach is best.”
RMF says HUD is aware of the HECM choice, and the company expects the product to appeal to an estimated 35% or more of the market currently.
“It’s consistent with what FHA implemented with utilization restrictions,” DeMarkey said. “We think HECM Choice fits perfectly in the marketplace given changes implemented.”
Written by Elizabeth Ecker