Private label Reverse Mortgages have been slowly creeping across the country over the past two years. There are some very key distinctions between the private label and the government insured HECM that are important to keep in mind.
The government insured HECM Reverse Mortgage program has a growth factor that allows a homeowner’s available credit, based on the untapped portion of allowable equity, to grow and compound thereby providing retirees and seniors with increased levels of home equity access each year as they age. The private label programs do not have a growth factor characteristic. This means the program is more defined and more favorable for the lender and less attractive for the homeowner.
Government insured HECMs also provide more equity access from day one then their private label counterparts. Although this gap has been narrowing there is still a significant gap between what a government insured HECM will allow for equity access and a private label product.
Lastly, the government insured HECM is not only insured by the government but it also has a failsafe feature that the private label version does not have in the event of lender catastrophe. The HECM has two mirrored deeds of trust. The first one is held by the lender and the second one is held by FHA. In the event of catastrophic issues affecting the lender, the FHA mirrored second trust would move into first trust position and the homeowner would be protected. Now to this point, some might say how could there be such an occurrence. Well, all we have to do is peek back at what happened with AIG, Fannie Mae and Freddie Mac in recent years.
It is important to stick with the government insured HECM Reverse Mortgage as the predominate choice in retirement. The flexibility and security to the homeowner, and the benefits, are far superior to any private label products that are currently being offered.
Good News! We have added Washington DC to our territory. We currently specialize in government insured HECM Reverse Mortgages for all counties in Virginia, Maryland, Washington DC, and Pennsylvania.