During a conference call with industry leaders on Thursday, the Department of Housing and Urban Development said it hopes to roll out a new reverse mortgage product on Oct. 4, 2010.
The new “HECM Saver” will be a low cost reverse mortgage product insured by the Federal Housing Administration. Unlike the standard HECM, which has a 2% upfront Mortgage Insurance Premium (MIP), the HECM Saver lowers the cost of entry for borrowers by charging only 0.01% upfront MIP. The product will also have an annual MIP of 1.25%.
Offered as both a fixed and adjustable rate, the HECM Saver will have principal limit factors roughly 11-23% lower than the standard product. While it doesn’t provide as much in proceeds to borrowers, it’s designed as low cost alternative to a home equity line of credit (HELOC).
During the call, HUD described the HECM Saver as “merely a different pricing option,” noting the rest of the product will remain the same as the HECM standard. However, many in the industry see it as a big opportunity to broaden the appeal of reverse mortgages by offering a low cost product to consumers.
HUD said a Mortgagee Letter describing the HECM Saver should be out before September 14th.