Lower upfront premium makes FHA Home Equity Conversion Mortgage more affordable

September 22/10: The U.S Department of Housing and Urban Development, known as HUD, today announced that HECM Saver, a second reverse mortgage option, will be available for all Home Equity Conversion Mortgage (HECM) case numbers assigned on or after October 4, 2010.

“Despite the popularity of our HECM loan product, we have noted concerns that some senor citizens find that our fees are too high for them,” said [Federal Housing Administration] FHA Commissioner David Stevens. “In response, we created HECM Saver wich will provide seniors with a reverse mortgage option that significantly lowers costs by almost eliminating the upfront Mortgage Insurance Premium (MIP) that is required under the standard HECM option.”

In the United States, the federal government insures the HECM loan to protect lenders should the final amount of the reverse mortgage exceed the value of the property when the reverse mortgage is terminated. FHA pays lenders the difference which would otherwise represent a business loss to the lender. Neither the property owner or the estate are responsible for this amount.

Note: 1. In Canada, a non-recourse clause in the reverse mortgage contract protects property owners and their estates, but there is no federal government insurance to protect lenders from loss if the final reverse mortgage balance exceeds the property’s market value.
2. In Canada, how much you actually receive after fees, initial and ongoing, is a vital issue to establish before signing up.

To read the entire September 22/10 release HUD No. 10-205: www.hud.gov/news/index.cfm

For more on HECM: www.hud.gov/offices/hsg/sfh/hecm/hecmhomelenders.cfm

For more on FHA HECM Saver: www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-34ml.pdf

For more information about HUD and its programs: www.hud.gov and espanol.hud.gov.