HECM 100 Reverse Mortgages to Continue With Major Lender

Last month we reported the view of one reverse mortgage lender who believed HECM 100 loans were gradually being phased out, replaced by higher-cost HECM 150 financing.

Joffrey Long, a 30-year veteran of the mortgage industry and the President of Southwestern Mortgage in Granada Hills, CA, explained that the interest rates on FHA insured reverse mortgages are determined by adding a certain percentage to the yield on one-year treasury obligations. The HECM 100 provided for adding only 1% to the one-year treasury. With the one year treasury at less than 5%, this meant that even after adding the one percent, HECM 100’s closed at an interest rate of less than 6%.

The HECM 100 is being replaced by the higher-cost HECM 150, which, said a release from Long, “is the same in every aspect, except 1.5% is added to the rate on the one year treasury security, rather than 1%. This extra half percent not only causes the borrower to owe more interest over time, more importantly, it means that the borrower is eligible for less money from the reverse mortgage.”

However, now comes word that one of the largest reverse mortgage lenders is sticking with the HECM 100. In an “alert” to lenders Financial Freedom says:

“In the past two weeks, we have seen further improvement in secondary market conditions as regards CMT-based HECM loans. While the market has not yet completely recovered, One-Year CMT+100 has
climbed above One-Month LIBOR for the first time since mid-August. Consequently, Financial Freedom is pleased to announce that we will be eliminating the delivery deadline of November 5 for
the HECM Monthly 100 product, and we plan to offer the product indefinitely.”

This is good news. Why? Because those considering a reverse mortgage should look at the widest possible array of products. The more options, the better.

Financial Freedom Senior Funding Corporation says it is the largest originator of reverse mortgages in the United States and originated over $5 billion in loan funding on $15.2 billion in home value in reverse mortgages in 2006. It says it is also the largest servicer of reverse mortgages with a servicing portfolio of over 130,000 loans.

As always, when considering any reverse mortgage product please speak first with an attorney who specializes in elder law.

This entry was posted on Friday, October 12th, 2007 at 2:53 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.