Reverse Mortgage HECM 100
In the middle of January 2007, the Bank of New York introduced a new Reverse Mortgage product to the market, the Home Equity Conversion Mortgage 100 (HECM 100). It’s introduction created an immediate impact in the market in relation to compensation and more importantly additional money to the senior. Not to be out done, in the middle of February, Financial Freedom introduced its new Reverse Mortgage product, the HECM Advantage. Since then many lenders across the country have tried to copy the original HECM 100 with variations designed to try and compete.
What does this all mean to us at NGFS? Our entire program was developed on the concept of “Doing What’s Right for the Senior”. Even with all the changes being rolled out under the Reverse Mortgage HECM Monthly loan programs, our position under this concept has not changed. For that reason we are asking everyone with NGFS to present all versions of the HECM available on the Reverse Vision and RMA software, but to recommend the HECM 100 as the loan of choice to our senior clients.
Why is the HECM 100 more beneficial to the senior? Simply put, proceeds and equity retention. There are presently three versions of the monthly HECM available through Reverse Vision and RMA, the HECM 150, HECM Advantage and HECM 100. What are the differences?
HECM 150: The 150 represents the margin used to generate the Expected Interest Rate, which means the higher the margin the higher the rate, resulting in lower proceeds. It also impacts the rate at which the loan accrues interest expense, increasing the loan balance, which reduces the equity in the home faster.
HECM Advantage: This product uses a floating margin. At first glance it looks like it provides more proceeds for the senior at settlement, but since the margin floats each month, it can have an adverse effect on the equity, similar to the HECM 150.
HECM 100: The 100 represents the margin used to generate the Expected Interest Rate. With the reduced margin, the Expected Interest Rate is lower which results in significant increases in the money available to the senior. Also since this is a fixed lower margin the overall impact on the senior’s equity retention is improved.
We have run extensive scenarios on all three of the monthly Reverse Mortgage programs listed above. Without a doubt the HECM 100 is, at present, the best loan of choice when working towards “Doing What’s Right for the Senior”. Whenever an application is requested from the field, if listed on the comparison and other documents as a HECM 150 or HECM Advantage, the application will be challenged by the home office to substantiate why the monthly HECM 100 was not used. The HECM 150 is only appropriate in the event the senior wishes an annual as opposed to a monthly interest adjustment.
Call 1-888-973-8377 or Find a Reverse Mortgage Loan Consultant in your area.
