Understanding the "Home Keeper"
While the headlines today are filled with Bernanke and Paulson and the talk about GSE limits, Discount Rates, Foreclosure Activity and who knows what else I wanted to shine the light on something that might sound like an answer to todays mortgage meltdown woes.
It's called "The Home Keeper"
Unfortunately, it isn't going to save the housing industry. It's a Reverse Mortgage. In fact it's Fannie Mae's brand or version of a reverse mortgage. I think it's even got a trademark!
As you may know by reading the headlines, Fannie Mae is a GSE - or government sponsored enterprise. They are the largest buyer (investor) of home mortgages and as this pertains to reverse mortgages, they are also the largest investor in Reverse Mortgages including the federally insured Home Equity Conversion Mortgage (see: HECM).
Differences
Not content with just the FHA version of reverse mortgage (The HECM) in '96, Fannie Mae came out with their own. They called it the Home Keeper. It was implemented to fill the gaps left open by the Federal HECM product.
Items like:
- Higher Property Values,
- Condos, PUDs, and other property types,
- and even Purchases
Did you know you could purchase a home with a reverse mortgage? - Now you do! Read below for more details.
Most of the same requirements apply - you have to be 62 or older, principal residence, and so on.
Why Home Keeper?
Home Keeper may allow you to borrow more than a HECM as the current limit for Fannie Mae is higher than the FHA limit (two separate agencies). The actual amount is determined by factors such as your current age, the value of the house, and current rates.
The borrower can elect to receive funds in a variety of ways including a lump sum, or a set monthly payment, or a line of credit, or a combination.
Interest Rates?
The interest rate for a Home Keeper loan is an ARM. It adjusts monthly. Surprised? The index is the current weekly average of the one-month secondary market CD rate, as reported by the Federal Reserve. Add the Index to the margin and there is your rate. Caps? Unfortunately there is no cap on the monthly adjustment but there is a lifetime cap of 12% above the initial rate. This surprises some people. Then again, the monthly change may be minimal depending on the current marketplace.
Buying a home with the Home Keeper
Yes, you can use the Home Keeper for a purchase! And do it as a single transaction. Many times this is done in conjunction with the sale of a prior house. Doing it in this manner can drastically reduce the costs involved, thereby providing more available income to the homeowner. This transaction is usually seen when moving from a larger home to a smaller one, or maybe moving closer to loved ones.
One word of caution: Consult your tax professional as there is a potential tax consequence in certain situations.
If you need more information - give me a call!
Mike Mueller (925) 288-9977 Ext 104
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