Wells Fargo to Revamp Reverse Mortgage Program
Wells Fargo Home Mortgage, the nation’s originator of reverse mortgages, will trim the margin it charges on a government-insured reverse mortgage product and begin offering the federally insured, variable Home Equity Conversion Mortgage (HECM) product using a lower margin for home loan applications taken on or after Febuary 5, 2007.
In addition, effective February 6, 2007, seniors who have already applied for a reverse mortgage with Wells Fargo will be offered the lower margin. Company officials say this change will save borrowers money over the life of their home loan and give them greater access to their home equity.
“A reverse mortgage is about making the most of the equity that seniors have built into their homes,” said Jeff Taylor, vice president of Wells Fargo’s Senior Products Group.
“By lowering the margin, we are lowering the home loan rate charged on a reverse mortgage. This means more seniors will be able to use the reverse mortgage program, giving them the ability to turn their home equity into additional retirement funds.”
As part of the new program, Wells Fargo is cutting the margin on its variable home equity conversion mortgage by 50 basis points.
It’s a move that executives feel will give seniors greater access to their home equity. As an example, a senior who is 70 years old with a home valued at $300,000 could get approximately $14,100 more in borrowing capacity than with a higher-margin HECM loan.
The HECM reverse mortgage is the most popular reverse mortgage in America today. Through the revamped program, the U.S. Department of Housing and Urban Development (HUD) insures mortgages that allow homeowners age 62 or over to convert their home equity into tax-free income.
The program has insured over 200,000 reverse mortgages since 1990. Wells Fargo Home Mortgage helped senior Americans secure nearly one-third of all reverse mortgage loans originated in 2006.
With a HECM, a senior homeowner receives proceeds from a mortgage lender - either in a lump sum, regular monthly payments, a home equity line of credit or a combination of the above.
When the house is sold, or the last remaining borrower dies or moves out of the home, the principal amount plus the accrued interest is repaid. The borrower can’t owe more than the value of the home.