HUD to Eliminate The Fixed Rate Standard Reverse Mortgage

After much speculation, HUD announced the future elimination date of the Fixed Rate Standard Home Equity Conversion Mortgage (HECM). For new case numbers assigned on or after April 1, 2013, any homeowner seeking a fixed rate reverse mortgage will be limited to the Fixed Rate Saver Program. HUD also notes that all fixed rate standard loans must close on or before July 1, 2013.

The Fixed Rate Saver Program does not offer the same dollar benefit as the Standard Program, however does have some features that will make it attractive to many borrowers. Due to the lower risk of the program to HUD, the Upfront Mortgage Insurance Premium (UFMIP) is just 0.01% of the lesser of the appraised value or lending limit (currently $625,500) as opposed to the Standards 2% UFMIP. For example, a property valued $200,000 will have an UFMIP with the Saver Program of $20, while the Standard would have $4,000.

Use our reverse mortgage calculator to see how much you qualify for under either program.

For borrowers looking to maximize the amount of money available to them after March 31st, the Adjustable Rate Standard program will still be available and will provide borrowers with a greater draw amount than the HECM Saver Fixed. Some borrowers may also choose to utilize the adjustable rate standard when looking to do a purchase reverse mortgage. There has been some discussion of limiting draw amounts under the Adjustable Rate, but this current news does not address that concern.

According to Mortgagee Letter 2013-01, HUD states that the elimination of the fixed rate standard product is “to help sustain the HECM program as a viable financial resource for aging homeowners and to strengthen the Mutual Insurance Fund.” Other steps, such as financial assessments or limited draws may be on the table in the near future. It’s anyone’s guess what they think HUD’s next move will be to help preserve the Mutual Mortgage Insurance Fund.

For any questions or to get started today please call us toll free at 1-888-888-4834 or apply online. If you need the full ability and security of the fixed rate standard, now is your time to make your move.


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