HUD Considering New Reverse Mortgage Product

In view of current limitations on reverse mortgage funding, there is also a need to fill the needs of seniors who do not wish to tap into all of their homes equity. The current structure of reverse mortgages does not give seniors the option to choose how much of their equity they borrow, and for many seniors this is an inconvenience, especially for those who only have a few years left on their mortgage. In order to accommodate more of those homeowners HUD is considering a mini HECM that will allow borrowers to choose lower dollar amounts in monthly payments and thus also have lower interest costs and origination fees.

At the present time this product is still in the development stage and HUD has not released the details concerning limits or provisions for the new product. In fact, it is not yet even certain whether they will offer a mini HECM but they are considering it because of the need for a product that offers more than the standard HECM. Not every senior homeowner wants to tap into every dollar in equity he has in his home - there may be a need for just enough to cover property taxes, renovations, or a new car for example. They don’t want to forfeit all of their equity, but they do have the need for either some outright cash or a smaller monthly stipend to pay for those additional expenses.

While the current HECM is based on a "one size fits all" concept, the idea behind the mini HECM is to offer a different kind of product and one that will be able to meet the needs of more senior homeowners. Many seniors may avoid using the standard reverse mortgage product because they do not want to cash in all their equity. Under current provisions the homeowner does not choose how much cash he will take from his equity but is provided with an amount for which he qualifies. This can be unattractive for those who choose a fixed rate reverse mortgage because they must accept all of the proceeds at the time they close on the loan and will pay interest on the entire proceeds.

Even though the interest on a variable rate reverse mortgage does not accumulate until you use the money, some people prefer to only draw on those funds they need. For example, if a homeowner has a home that will qualify for the maximum limit of $625,500 but only wants $200,000, he cannot currently make that decision. However, if the mini HECM is added to available products, it will be possible for a homeowner to choose the amount of cash he needs from his home and the payments he wishes to receive. This product has the potential to increase the number of reverse mortgages lenders issue, especially for those who have not cashed in on current HECM products because they do not wish to use all of the equity in their homes.

A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of "62 Senior Moments." If you would like more information, please call (866) 683-3690 or visit our website to research a Reverse Mortgage Lender.