Corona Reverse Mortgage Question - What is a HECM Saver?

On October 4, 2010, HUD launched the HECM Saver program. This new reverse mortgage program allows senior homeowners the option to reduce their closing costs by a significant amount as compared to the traditional HECM, now called the HECM Standard.  The HECM Saver’s Upfront Mortgage insurance premium is only .01% of the home value or lending limit, whichever is less.  An example of this would be a recent client of mine in an $800,000.00 home looking for a line of credit.  The HECM Standard Mortgage Insurance premium for him would be $12,510.00 but on the HECM Saver the upfront Mortgage Insurance premium is $62.50. I’d say that’s quite a difference!

There are no additional eligibility requirements for HECM Saver’ homeowners jut need to meet existing HECM program requirements.  The HECM Saver is available for all HECM transaction types and payment plans.

One disadvantage to the new program is that the amount of money available to the borrower is less.  Meaning the loan to value ratios are lower (hence the reduced premium amount). Insurance premiums are based upon risk after all and the risk of loss to the insurer (FHA) is significantly reduced when the loan amount is lower.

So, what niche will the HECM Saver fill?

I think the new HECM Saver could be a great compromise to seniors who are looking for a traditional Home Equity Line of Credit but do not want to have to commit to repayment of that loan after a term of 10, 15 or 20 years, or possibly have difficulty qualifying for the amount of credit line they would like to have due to a fixed income.  Remember, a HECM loan does not have the income requirements traditional loans have. 

I think that senior homeowners who would benefit from paying off a small mortgage payment may also find the HECM Saver much less “scary” than the Standard program.

For more information about the new HECM Saver program you may wish to check out HUD’s website.

I’d love to hear what you think?