WASHINGTON—The latest Federal Housing Administration data shows the mortgage insurer had endorsed nearly 100 of the new HECM Savers by the end of December. That appears to be a slow three-month start for the HECM Saver, which some view as the future of the reverse mortgage industry. But industry officials insist the FHA monthly reports are a lagging indicator of actual originations.
FHA lenders were given the green light to start making HECM Savers on Oct. 4. MetLife was one of the first out of the box and its national sales leader says the HECM Saver now comprises 17% to 20% of its monthly reverse mortgage production.
“We are very excited with that progress,” Eric Declercq said. “We still see heavy usage of standard HECMs,” he added.
The MetLife executive would not disclose origination numbers.
FHA designed the Saver as a low-cost alternative to the standard Home Equity Conversion Mortgage, which was launched over 20 years ago.
The HECM Saver has a nominal 0.01% upfront fee, compared to the 2% upfront fee on a standard HECM, which is considered expensive on top of the 1.25% annual premium. As a trade-off, the HECM Saver borrower receives 10% to 18% less in available funds than the standard HECM product.
MetLife is finding the adjustable-rate HECM Saver is very competitive with home equity lines of credit and appealing to seniors because they don’t have to make monthly payments.
“The ARM product fits customers who don’t want a full draw,” Declercq said in an interview. It provides seniors with a rainy day fund. In addition, the funds can be used to enhance retirement income strategies or simply defer going on Social Security for a few years.
With the fixed-rate Saver program, seniors have to take the full draw. “We see very little volume on the fixed-rate Saver,” the MetLife national sales leader said. “The sweet spot for the Saver is the ARM product.”
MetLife also is finding more interest in the HECM Saver from seniors living on the East and West Coasts, possibly because of the higher home values.
Meanwhile, Wall Street traders are starting to see more securitized pools of HECM Savers and they are hoping to see more.
“It is starting and definitely picking up,” said Jeff Traister, the head of Cantor Fitzgerald’s reverse mortgage trading desk.
At first, some originators mixed a few HECM Savers into Ginnie Mae pools of standard FHA-insured HECMs.
In one deal Traister worked on, the issuer took the HECM Savers out of the pool. “You really shouldn’t be mixing them because people aren’t really sure how they will perform vs. the standard HECM,” he said.
There is an “enormous” amount of prepayment data on standard HECMs, but no one knows how HECM Savers will act when securitized. “They should be separated and I think they will be,” the bond trader said.
