House and Senate appropriators allotted $150 million for the Federal Housing Administration (FHA) reverse mortgage program but now it appears those credit subsidy funds won’t be needed because of the new FHA Home Equity Conversion Mortgage (HECM) Saver program.

This is good news for the FHA HECM program, which probably never would have seen the $150 million with the new Congress fixated on cutting budgets and reducing deficits.

The FHA launched the HECM Saver in early October as a less expensive alternative to its traditional HECM offering which was created back in 1990.

The HECM Saver has a nominal upfront premium of 0.1% and a maximum payout that is 10% to 18% below the standard payout. But it is designed to be a less risky program that generates a 1.25% annual premium so the HECM program does not have to rely on congressional appropriations.

If the lenders generate enough loan volume, the HECM Saver will “cross-subsidize” the standard HECM product and eliminate the need for the credit subsidy, according to Peter Bell, president of the National Reverse Mortgage Lenders Association.

So far it has worked. The government is currently operating under a continuing funding resolution that does not contain any credit subsidy funds for the HECM program.

“The re-engineering is keeping us going,” Bell said.

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