Starting early October FHA will unveil a variation to their Reverse Mortgage Plan in order to facilitate seniors involvement in the program.
FHA has annouced modifications to its Home Equity Conversion Mortgage HECM product which is a reverse mortgage loan insured by the federal government. HECM enables elderly homeowenrs (62 year or older) to borrow against the equity in their home without having to make traditional monthly payments. Under this program funds are advanced to the borrower and interest accrues, but the outstanding balance is not due until the last borrower leaves the home, sells or passes away. If the balance due upon settlement of the loan exceeds the value of the home, the FHA insurance covers the difference. The borrowers may draw down funds as a lump sum, established a line of credit or request fixed monthly payments for as long as they continue to live in the home.
The largest complaint among borrowers has been that the upfront costs were high. HUD responded by creating a variant on the standard HECM product that subtantially lowers those costs. The new product is called the HECM Saver. It provides lower upfront costs by eliminating the Mortgage Insurance Premium required to be paid upfront under the standard HECM option.
9/07/2010
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