Louisiana Reverse Mortgage
How Changes in the HUD HECM will Affect your Louisiana Reverse Mortgage
Cooking up some Cajun food thanks to their Louisiana Reverse Mortgage
The recent addition of a new option for the HUD HECM will have a major effect on those homeowners seeking a Louisiana reverse mortgage. The changes will alleviate some of the problems many homeowners face when they are thinking about taking out a reverse mortgage, namely the high cost of closing the loan.
Mortgagee Letter 2010-34 and the Louisiana Reverse Mortgage
Mortgagee Letter 2010-34 has made some significant changes that will help many people contemplating whether to apply for a Louisiana reverse mortgage. HECM (Home Equity Conversion Mortgage) programs have previously catered to those senior homeowners who wanted to cash in on the entire equity in their homes. As a result many felt the closing costs were too expensive for their needs. This new option which will be available for new HUD cases beginning on October 4, 2010 will substantially reduce costs for those seniors seeking a Louisiana reverse mortgage with the major change being the reduction of the required Mortgage Insurance Premium (MIP) to .01% for the HECM Saver Program compared to two percent for the HECM Standard.
HECM Saver Option Provides Incentive for Louisiana Reverse Mortgage Lenders
With many seniors choosing not to acquire a Louisiana reverse mortgage because of the high closing costs, the HECM Saver option is an incentive for Louisiana reverse mortgage lenders to reach out to the seniors who have not previously entered into a reverse mortgage with any of the Louisiana lenders. The lower cost of MIP will substantially reduce the closing costs of a Louisiana reverse mortgage thus drawing in those seniors that previously could not afford to enter into a reverse mortgage transaction. The lower cost factor that the HECM Saver option offers will allow lenders to offer Louisiana reverse mortgages to a higher percentage of senior homeowners, a move that will benefit both seniors and Louisiana reverse mortgage lenders.
Another Advantage of the HECM Saver Option for Louisiana Reverse Mortgage Borrowers
In addition to the lower closing costs of the HECM Saver option, Louisiana reverse mortgage borrowers can also avoid cashing in all of their equity. With the HECM Standard homeowners cannot choose how much of their equity to borrow thus all of their equity up to the $625,500 ceiling is automatic. This is another reason for the higher closing costs associated with a Louisiana reverse mortgage and insured through HUD. However, with the new HECM Saver option seniors have the option to cash in only the amount of equity they need or want. Since the MIP is a percentage of the amount of the loan, borrowers who obtain a Louisiana reverse mortgage under the HECM Savers option will pay a lower premium at closing than those homeowners who choose the HECM Standard option and must cash out the entire amount of their equity (up to the maximum). This reduction in MIP percentage and the ability for borrowers to cash out only the amount of equity they need certainly makes a Louisiana reverse mortgage more affordable for many homeowners.
