The Federal Housing Administration is working on a new reverse mortgage product for seniors who need to tap the equity in their homes to cover daily living and health care costs.
The new 'HECM Saver' mortgage has a substantially reduced FHA upfront premium but the typical borrower would receive 10% to 18% less in available funds than the standard home equity conversion mortgage product. (In other words, the loan carries lower points but borrowers can draw down less money.)
The upfront premium for the standard HECM product is two points. The HECM Saver loan would carry a premium of just 1/10th of one point.
"The upfront insurance premium has been a deterrent to some prospective borrowers, particularly those needing less than the full amount available under the traditional HECM Standard program," said Peter Bell, president of the National Reverse Mortgage Lenders Association. "This new variation, the HECM Saver, presents a sensitive response to their needs," he added.
Department of Housing and Urban Development officials acknowledged that the agency is working on such a product but declined to comment any further.
