Taking Care of Mom and Dad: Home Keeper for Home Purchase
Headquartered in Washington, D.C., Fannie Mae is the nation's largest purchaser of home mortgages and a large investor in reverse mortgage products. Fannie Mae purchases reverse mortgages from financial institutions that are approved by Fannie Mae.
In 1996, Fannie Mae developed its Home Keeper reverse mortgage as a supplement to the federally insured HECM program. Home Keeper was developed to address unmet needs that could not be served by the HECM program, such as individuals with higher property values, condominium owners and seniors wishing to use a reverse mortgage to purchase a new home.
As with the HECM, the amount of funds available to the borrower under a Home Keeper loan is determined by a formula and varies with the age and number of borrowers at the time of application, the value of the home and current interest rates. Home Keeper loans can be larger than HECMs because Fannie Mae's maximum mortgage limit is almost always larger than the FHA maximum mortgage limit.
The consumer may choose to receive the funds from a Home Keeper mortgage as fixed monthly payments for life (i.e., for as long as the borrower occupies the home as his/her principal residence); a line of credit; or a combination of monthly payments and line of credit.
Home Keeper borrowers are charged an origination fee (that may not exceed $2,000 or 2 percent of the value of the home, whichever is greater), a onetime up front fee equal to 1 percent of the adjusted home value, a monthly servicing fee ($15 to $30), and other closing costs. Many of these can be financed in the mortgage.
The interest rate charged on a Home Keeper mortgage adjusts monthly and is equal to a fixed spread above an index rate -- usually the weekly average of the one-month secondary market CD rate, which is published by the Federal Reserve. The rate may never rise by more than 12 percentage points above the initial rate; there is no cap on a monthly adjustment other than the lifetime cap. This interest rate is generally lower than other reverse mortgages.
