HECM ‘line of credit’ growth still beneficial but more realistic

Recent changes to the Home Equity Conversion Mortgage enacted on October 2nd have reduced the ongoing FHA insurance premium substantially and led to many lenders reducing their loan margins to soften the blow of reducing lending ratios or PLF factors. What can be easily overlooked is the impact on the line of credit growth rate.

For decades the growth rate of the reverse mortgage’s principal limit, or ‘line of credit’ was largely ignored or overlooked. Few promoted this distinctive benefit unlike any other mortgage loan offered to homeowners. That changed as reverse mortgage professionals began to engage the financial planning community. The benefits of the reverse mortgage’s use in retirement, and more specifically a series of academic papers illustrated the ‘standby’ reverse mortgage strategy.

With lenders lowering margins by an average of a half of one-percent to soften the blow of reduced lending ratios, and drastically reduced ongoing MIP insurance premium rate the growth rate stands to be reduced by…

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