AAG Launches New HECM CAP5 Adjustable Rate Reverse Mortgage Product

American Advisors Group is rolling out a new Home Equity Conversion Mortgage loan, the HECM CAP5, which joins the adjustable rate reverse mortgages now available that include a monthly adjusting rate and a lifetime cap. 

The HECM CAP5 features a lifetime cap of 5% and adjusts on a monthly basis. 

Those opting for the new, open-ended product will have access to the same amount of proceeds and payment plans as offered by other products, but at a reduced lifetime interest rate cap, AAG said in announcing the new product. 

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“We are excited to offer a new monthly adjustable-rate HECM solution, featuring a lower lifetime interest rate cap, to our growing suite of products and look forward to launching proprietary products in the coming weeks and months,” said Kim Smith, AAG senior vice president, Wholesale Lending. “The HECM CAP5 provides AAG Wholesale partners more options to meet their clients’ specific needs.”

The HECM CAP5 joins competing products offered by other lenders that also feature monthly adjustable rates and lifetime caps. 

In May, Reverse Mortgage Funding launched its HECM MAX5 product, which also features a monthly adjustable rate and lifetime cap of 5%. Other lenders have since introduced comparable loan offerings.

Written by Elizabeth Ecker

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  • If rates rise more than 5% and the cap comes into play (granted, that’s a big jump), future draws will be sold into the secondary market at a loss. This is a different dynamic than forward loans since they have no future draws. Apparently FHA is comfortable with this risk as it relates to the financial condition of lenders.

    • This is not a new risk. For years we had the annually adjusting HECM with the same basic issue except it also had annual caps of 2%.

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