The Home Equity Conversion Mortgage (HECM Reverse Mortgage) program was signed into law by President Reagan in February 1988. Prior to this date, this was a bank run program and they had the power to foreclose on homeowners if they ran out of equity. Unfortunately, some seniors ended up homeless as a result of lost equity. In 1988 protections were put into the HECM program to stop this from happening; the initial mortgage insurance premium (IMIP) and the monthly mortgage insurance premium (MIP) guarantee that a homeowner can never owe more than the home is worth, thus protecting them from being kicked out of their homes as was previously done by private bank reverse mortgages. Homeowners must continue to pay their property taxes and home insurance, just like any other homeowner. The MIP fees also guarantee that you will receive your monthly payment or Line of Credit amount even if the home value were to drop below the loan amount. This actually happened to my grandmother in 2009 after the housing market collapsed. She kept receiving her monthly checks on her HECM reverse mortgage, even though she was upside down on her mortgage, her neighbors that were upside down on regular loans or HELOCs had to make monthly payments still and owed more than their homes were worth. She was in a much better situation because of her HECM reverse mortgage and specifically the MIP protections. This is the safest loan one can have, but there is a price for this safety, it is covered by the monthly MIP and the Initial MIP fees. The great news is these fees have dropped in 2018 from the previous year.
The onetime, Initial MIP fee used to be 2 ½ % of the home value for those with significant debt; in 2018 those fees have dropped by ½% to 2%. For example, on a $600,000 home value that is a savings of $3,000 in fee. The remaining fee is actually pro-rated to age 100 so any unused portion of the fee is returned to the borrowers upon refinance or sale of the home. The monthly MIP fee was lowered by .75%. This monthly MIP fee is only charged on the actual loan amount, not the full value of the home. For example, a loan amount of $100,000 has had the monthly MIP lowered by $62.50/month or $750/year. The fees have been lowered significantly, but your protections have stayed the same. To learn more about how this safe, government insured program can help you or someone you love, you may contact me at 877-567-7476 or by email at firstname.lastname@example.org .