New HECM Saver Option

The purpose of the new HECM Saver program is to lower upfront closing costs for senior borrowers who wish to borrow smaller amounts than the maximum loan amount that would otherwise be available to the borrower under the traditional HECM product. ML 10-34 thus coined new product names for the two HECM programs that are available to senior borrowers: HECM Standard and HECM Saver. According to ML 10-34, the two programs must be identified as separate and distinct initial mortgage insurance premium (MIP) options.



In a nutshell, the HECM Saver is a second FHA-insured HECM option that essentially carries no initial MIP. Effective for all HECM case numbers assigned on or after October 4, 2010, senior borrowers may select either a HECM Saver or a HECM Standard option. In addition, ML 10-34 implemented changes in the following areas related to HECM lending: determining initial and monthly MIP; calculating the initial MIP in HECM refinance transactions; setting new reduced HECM principal limit factors and a reduced effective interest rate floor; providing guidance for managing the existing pipeline of HECM loans; and utilizing correct and updated HECM loan documents and disclosures.



All existing program features associated with the HECM Standard are also available under the HECM Saver. This includes all HECM transaction types (traditional, purchase money and refinance); all five payment plans (tenure, term, line of credit, modified tenure and modified term),; adjustable and fixed interest rate features: and all interest rate indices (CMT and LIBOR).



Initial and Monthly Mortgage Insurance Premiums



By statute, all FHA-insured loan programs must provide for an initial MIP.2 As a result, for the HECM Saver, HUD announced that the initial MIP will be 0.01% of the maximum claim amount (or “MCA”), which is collected at the time of loan closing. For an average MCA of $250,000, under the HECM Saver the initial MIP will be $25. For HECM Standard, the initial MIP will continue to be 2% of the MCA, which is also collected at the time of loan closing. Thus, under the HECM Standard, an average MCA of $250,000 will require an initial MIP in the amount of $5,000. The term “maximum claim amount” is defined as the lower of the appraised value, the national mortgage limit, or the sales price for the home (for HECM for purchase loans).



Monthly MIP (the mortgage insurance premium that accrues to the loan and paid monthly to HUD) for both HECM Saver and HECM Standard will be charged at an annual rate of 1.25% of the outstanding loan balance. As a reminder, HUD previously increased the monthly MIP for “traditional” HECM loans (i.e., HECM Standard) from .50% to 1.25 % pursuant pursuant to Mortgagee Letter 2010-28, effective for all case numbers assigned on or after October 4, 2010.

This may be a good option for seniors who are looking for a shorter term loan or preserving equity in their property.

New Options for Reverse Mortgage Borrowers...get more save more

Thousands of dollars are now available at a lower cost for reverse mortgage borrowers. This new pricing option will allow seniors to get more money—it will remove the servicing and origination fee, making the new amount of money available between $3,500-$10,000.

With this option, the homeowners 62 or older can unlock even more of their equity and draw the proceeds of the loan in an up-front lump sum. This can be beneficial when it comes to paying off a mortgage, supplement retirements and medical bills.

Individual cases will, of course, differ, but most senior borrowers will receive more money with the new rule. There will be other costs involved, which can include the FHA mortgage insurance premium, mortgage taxes, recording fee, appraisals, etc

www.pwneufeld.com

New HECM Pricing + Lower Fees

Effective 4/7/10 new fixed-rate of 5.49% or LIBOR variable rate 2.25% with zero origination fees. Great opportunity for seniors to save over $2500 in fees and get more and save more.

Piggy Bank your House-

I want to share with you a story that was one of the highlights what this business is all about. It demonstrates how we as reverse mortgage professionals can make a difference in a family’s life.

I was contracted by a lender working with a realtor looking for property for a retired couple moving from southeast Missouri to the Kansas City area. They had sold their home and planned to relocate closer to family members. Plans were to use cash equity proceeds from the sale for a conventional mortgage purchase.

Several discussions were held and a meeting to discuss financing arrangements including a traditional mortgage or the HECM FHA purchase program. They were wary about the reverse mortgage program as they hadn’t heard about the program for seniors age 62 and over. After a detailed program explanation, they decided to apply for a HECM purchase.

They had determined their price range and based on the reverse mortgage estimate, they could put cash equity from their sale plus cash proceeds from the reverse mortgage purchase their new home and have no future payments for as long as they live in their home.

Application documents were submitted and we closed their loan about five weeks later, I will never forget that day. When we were done signing the closing documents, the wife looked at me with a twinkle in her eyes and said, “Well, when we started this process I thought this sounded to good to be true, but it's true!” They were so happy that they didn’t have to make monthly mortgage payment as cash from reverse mortgage helped them fund their home and give them peace of mind.

www.pwneufeld.com