The Call for a Low-Cost HECM


A Call for the Return of the HECM Saver?

reverse mortgage newsIn October 2010, the HECM Saver was introduced giving borrowers considerably lower upfront FHA insurance premiums in exchange for lower lending ratios or principal limits. Three short years later the Saver was eliminated from the Home Equity Conversion Mortgage Program. Ironically, it was this now-eliminated program that spurred considerable interest in the HECM within financial planning circles. Today, some retirement experts are calling again for a low-cost reverse mortgage.

When HUD eliminated the HECM Saver it also increased the upfront or initial mortgage insurance premiums for those utilizing a high percentage of available funds. In their reengineering of the program they baked in disbursement options that offered lower premiums for…

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3 comments

Steve Kalscheur September 12, 2016 at 5:02 am

Absolutely, the SAVER should at least be available. It wasn’t utilized simply because it wasn’t around at all that long, and wasn’t properly discussed among those who offered the product. Also, many of the financial planning theoretical basis use the SAVER as a low cost alternative – this is the standby line……

Reply
Forward in Reverse September 12, 2016 at 1:41 pm

Seriously, did all of the creative marketing geniuses who thought up the Edsel, the Home Keeper, New Coke and that unbelievably stupid mattress company in Texas just recently get marketing jobs with FA professionals!?

The HECM Saver didn’t work because NO ONE WANTED IT!!! The ability to save $1,000’s on the upfront cost doesn’t off set losing $10,000’s on the PL!

Besides, if you draw less than 60% you do generally get a Low Cost Loan. And, as Shannon stated in the article, many lenders are offering Lender Credits to offset upfront costs.

Bringing back the HECM Saver would be a TOTAL WASTE OF TIME, EFFORT AND RESOURCES!!! You’d be better off planning for another Extreme Summit!

Reply
The_Cynic September 12, 2016 at 4:01 pm

Forward in Reverse,

Facts seem to be out of your wheel house. You claim: “The HECM Saver didn’t work because NO ONE WANTED IT!!! The ability to save $1,000’s on the upfront cost doesn’t off set losing $10,000’s on the PL!”

Are you really that biased that you do not understand we are comparing the product today with the Saver, not to the Standard of the Saver era!!

So let us compare just two ages with an expected interest rate of 5% to see what the difference between a PLF today is with a Saver PLF for both ages and then compare the upfront costs for each product.

The PLF for a 62 year old today is 52.4% and for a Saver 52.3%. We can stop right there. The PLF today for a 62 year old is LESS THAN the PLF for a 62 year old with a Saver. So you are absolutely wrong when it comes to 62 year olds where the expected interest rate is 5% and less.

Let us do the same for a 90 year old. The PLF now is 75% and the Saver was 61%. So the Principal Limit difference on a $625,500 home value is $87,570, favoring the HECM of today. So here you are right.

You talk about lender credits but do you understand that this is no give away? For that relief lenders generally charge a higher margin rate and sometimes have other requirements as well.

But now let us look at upfront MIP costsof the two products with a home value of $625,500. With the Saver, the cost was $62.50. Today when the disbursements available to a borrower in the first year exceed 60% of the principal limit, that same cost is $15,637.50. But if those same available disbursements are 60% or less, the same cost drops to $3,127.50.

So making the right comparisons, gives us real dollars to look at. So the question becomes, do you originate any HECMs today or did you originate any Savers? You do not seem to understand that the differences now vary more with age and that a Saver would generally be more beneficial for a 62 year old, but vice versa for a ninety year that needs all of the proceeds they can get their hands on. For most HECM borrowers today, Savers could be a genuine bargain.

Let’s quit jumping to conclusions without relevant comparisons. Let us stop rumors based on very, very old conclusions. In other words, get up to date and stop bothering people with the irrelevant.

Reply

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