In fall 2010 FHA, Federal Housing Administration, which insures all the HECM reverse mortgages launced a new version called Saver. Good name for a financial product, which saves the money of the borrower. The upfront fees have been even 5 % to the value of the home, so they have time to collect the accrued value when the running time is long. Saver will reduce the upfront fees by 40 %.
1. The Mortgage Insurance Is The Only Upfront Fee.
FHA collects the obligatory mortgage insurance from the borrower, which is usually 2 % to the home value. However, they have cut it down to 0,01 % with the HECM mortgage saver. The mortgage insurance is used, if the home value will not cover the capital, accrued interests and all the costs.
The upfront fee of Saver is lower, because the target group can borrow only about 80 or 90 % to what they could with the usual reverse mortgage. For example 75 year old with a home valued at $ 500.000 could get $ 262.000 with Saver but $ 331.500 with a normal HECM reverse mortgage. Saver is a lower risk product to FHA because the lending limit is lower.