Stop blaming the HECM sandwich!
Dan Hultquist explains why lawmakers, the media, and others should stop blaming the HECM ‘sandwich’…
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8 comments
As a fact checker, do HECM Savers always have the lowest PLF? The answer is no. The HECM Saver in the following case actually has a higher PLF than today’s HECM Standard.
For a 63 year old with a 5% expected rate,
the PLF for a Saver on 9/1/2012 was 0.526
the PLF for a Standard on 9/1/2012 was 0.625 and
the PLF for a Standard on 9/1/2023 is 0,416
So while most think that the Saver has the lowest PLF rate, in this case the truth is that the current HECM Standard has the lowest PLF rate.
Rules of Thumb are very useful until they are NOT (i.e., wrong).
Agreed, PR. The HECM Saver PLFs of 2013 would be attractive by 2023 standards. But of course, the Saver no longer exists. If it did, one would logically assume PLFs would’ve been cut in 2014 and 2017 and the floor rate reduced. This would mean a Saver borrower today (age 63) would qualify for approximately 0.20-0.25 (20% to 25% of the home’s value. Could we sell a HECM JR. Sandwich? Probably, but only to patrons looking for a cheap late-night snack.
Dan
All valid points to which I wholeheartedly agree.
I wonder if FHA would even offer a Saver today with today-s much riskier ongoing MIP of just 0;5% compared to the Saver+s ongoing MIP of 1.25%? The ongoing MIP of 1.25% along with along with its significantly lower PLFs when compared to the Standards of the Saver era greatly reduced the risk of a 0.01% initial MIP (almost no initial MIP at all).
Shannon and Dan, this was excellent and loved the analogies. Dan, you are right on, much more attention needs to be placed on backend education but that’s the difference between a call center and an LO that gives personal education and attention to their customers.
You guys are the best, I have been a fan of Dan’s for a long time and I have become a fan of yours recently. I learn something new every time.
Thank you so much!
Love this analogy.. Thanks Dan and Shannon for all the info you pump into the Reverse space!!
great show today !
jml
Good analogies. Plan to use this. thanks Dan and Shannon