Many in the senior community may have considered a reverse mortgage as an option to remain in their homes. With a new FHA Home Equity Conversion Mortgage Program (known as HECM), one of the biggest upfront fees that borrowers are expected to pay will be almost eliminated. But The New York Times article, Changes on Reverse Mortgages Will Alter Fee Structure, warns that the "ongoing monthly insurance premiums will rise drastically".  In addition, the NCOA (Nation Council on Aging) has put together a free booklet available at their website entitled Use Your Home to Stay at Home (see below).

HUD has released a new modification called 'Saver' that is explained by the federal agency in this way:

FHA designed HECM Saver as a second reverse mortgage option for the purpose of lowering upfront loan closing costs, for homeowners who want to borrow a smaller amount than what would be available with a HECM Standard loan. This option will be available for all HECM case numbers assigned on or after October 4, 2010.

"Despite the popularity of our HECM loan product, we have noted concerns that some senior citizens find that our fees are too high for them," said FHA Commissioner David Stevens. "In response, we created HECM Saver which will provide seniors with a reverse mortgage option that significantly lowers costs by almost eliminating the upfront Mortgage Insurance Premium (MIP) that is required under the standard HECM option."

HECM Saver will have an upfront premium of only .01 percent of the property's value. Under the HECM Standard option, the upfront premium will remain at 2 percent. The MIP for both HECM Saver and HECM Standard will be charged monthly at an annual rate of 1.25 percent of the outstanding loan balance.

The reduction in upfront fees will be accomplished while substantially lowering the risk to the FHA insurance fund because the principal limit or amount of money available to a borrower under theHECM Saver program will be reduced. Borrowers will receive approximately 10 to 18 percent less under the HECM Saver option, than they would receive under HECM Standard.

HECM borrowers may opt to receive funds as a lump sum at loan origination, establish a line of credit or request fixed monthly payments that are disbursed for as long as they continue to live in the home. Funds are advanced to the borrower and interest accrues, but the outstanding amount does not have to be repaid until the borrower dies, leaves the home or sells the property. At that time, if the balance due on the loan exceeds the value of the home, FHA insurance pays the difference.

For more information on FHA HECM Saver option, read FHA's mortgagee letter 2010-34.

In addition, the National Council on Aging has provided this information about a new booklet that they've devised on this topic that will now be provided to those requesting reverse mortgage information:

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