Earlier this month we reported on a Wall Street Journal piece that recommended holding off on a getting a reverse mortgage because of changes in the works that could benefit consumers. The first of these changes came last week last week with the announcement by BNY Mortgage Company (BNYMC) of their new HECM 100 reverse mortgage:

HECM 100 is a federally insured HECM loan that offers lower interest rates than a traditional HECM, saving borrowers significantly in costs over the life of the loan while giving them immediate access to more cash.

HECM 100 adds choice to the reverse mortgage buying equation, allowing consumers to borrow more money at a lower overall cost.

For example, a reverse mortgage customer age 70, with a home valued at $300,000 can receive approximately $13,000 more in borrowing capacity with a HECM 100 than the traditional HECM loan. At today’s interest rates, the homeowner will save approximately $28,000 in interest costs over the expected life of the average loan.

So how is BNY able to accomplish this? In a word - competition.

For years the single “buyer” of federally-insured home equity conversion mortage (HECM) loans from originating lenders has been Fannie Mae, the quasi-governmental agency that specializes in buying loans (and reselling them to investors) to maintain liquidity in the mortgage market. Since 2001, Fannie Mae has dictated that in order for it to buy HECM reverse mortgages, it required a markup 1.50% above the one-year US Treasury rate. This markup is passed on to borrowers in the form of a higher effective loan interest rate.

Now, BNY has found investors willing to purchase the same HECM loans at a markup of just 1.00%. Here’s a rate comparison of the new HECM 100 to the standard HECM using interest rates as of the week of January 9th:

Rate Component	Monthy Adjusting HECM 100	Monthy Adjusting HECM
Index (1-yr Treasury)	4.98%	4.98%
Lender’s Margin	1.00%	1.50%
Mortgage Insurance	0.50%	0.50%
Effective Loan Rate	6.48%	6.98%
Credit Line Growth Rate	6.68%	7.21%

(As shown, one side-effect of the lower loan rate is a correspondingly lower credit line “growth rate”, if this payment option is chosen.)

Bringing new competitive forces into the reverse mortgage is great news for potential borrowers. Even officials of the US Department of Housing and Urban Development (HUD) are praising the new HECM 100:

“BNYMC’s introduction of the new HECM 100 product is wonderful news for senior homeowners because it offers the consumer more money at lower costs,” said Meg Burns, director, Single Family Program Development, U.S. Department of Housing and Urban Development. “This is exactly the kind of product innovation the reverse mortgage industry needs in order to help older homeowners live a more comfortable and financially secure life.”

The HECM 100 is now available directly from BNYMC throughout Connecticut, Delaware, Florida, Georgia, Maine, Massachusetts, New Jersey, New York, Pennsylvania, and Rhode Island. In addition, HECM 100 will be available from select BNYMC wholesale partners throughout the United States.

Clearly, BNY has set the bar higher and competing lenders will have little choice but to respond with innovative products of their own. In the near term, don’t be surprised to see sales pitches and pressure tactics to get deals closed escalate. If you’re in the market for a reverse mortgage and can afford to wait, you should. At a minimum, take a look at the BNY reverse mortgage calculator to see what the HECM 100 could mean to you.

More information and opinions on the new HECM 100 reverse mortgage can be found at the ReverseMortgageDaily blog.

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A Few More Related Articles of Interest:

Tips For Avoiding Reverse Mortgage Scams

Reverse Mortgages and Predatory Lending

Will Genworth Bring New Perspective to Reverse Mortgages?

HECM Competition and Innovation Continues

Social Security + Reverse Mortgage = Procrastinate!