News by Subject
Complete list of specialty news sections.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Mortgage Industry News
Subscription-based news for people who work in real estate finance.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from

Mortgage News Reprints
Put entire stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed stories for your web site or for your RSS reader.

News Archives
Archive of news entries.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Graphs
Directory of lenders, branch operators and mortgage service providers.
home advertise email RSS about us
HOT Topics Rates Glossary LO License Search
Consumer Mortgage News
Free mortgage news for current and prospective borrowers from a leading online mortgage industry news publication.

Should I Convert or Refinance My Reverse Mortgage?

Options for HECM

March 1, 2018

By JACK GUTTENTAG The Mortgage Professor (Tribune News Service)

Jane took out a home-equity conversion mortgage on her house five years ago when she became 62. An HECM is a reverse mortgage.

Because she was still employed at the time, she elected to take a credit line, which she has used sparingly ever since.

She has now quit her job and wants to receive the largest possible payment every month -- a "tenure" payment, which is paid for as long as she remains in her home.

Jane has options.

She can modify her HECM by converting her unused credit line into a tenure payment.

But she can also refinance, taking the largest possible tenure payment on a new HECM. Jane wants to know which of these payments would be larger. She may also want to know which option will cost her estate the most.

Refinancing and Modification as Options
Refinancing and modification are alternative ways of changing the features of a mortgage. With a refinance, the changes occur by terminating the old contract and executing a new one. With a modification, borrower-initiated changes occur within the existing contract between borrower and lender. That contract must include provisions that make modification possible.

Both forward and reverse mortgages allow borrowers to refinance without a penalty, and in both cases borrowers can modify the loan by paying down the balance. However, HECM reverse mortgages allow several other types of modification that are not available on forward mortgages.

Types of HECM Modifications
One type allows borrowers with an unused credit line to draw on it, either on a discretionary month-to-month basis or by taking a fixed monthly payment over some specified period. Another HECM modification allows borrowers who are drawing a monthly payment now to increase it if the existing draw is less than the maximum, reduce it, change the period over which it is drawn or convert it (in whole or in part) to an unused credit line.

These options to modify a HECM mean that in some cases modification and refinancing are competing ways to draw funds. This is the case with Jane.

Factors Affecting the Decision
Working in favor of the refinance option is that Jane is now five years older and the value of her house has increased, both of which command larger monthly payments.

Working against the refinance option is that it involves a new set of closing costs, which reduces payments. A modification costs only $20. But knowing all this doesn't answer the question of which option will provide the largest payment.

About the Writer
Jack Guttentag is professor emeritus of finance at the Wharton School of the University of Pennsylvania.

next story

back to home page

To see more of The Mortgage Professor or to subscribe to the newspaper, go to

Copyright (c) 2018, The Mortgage Professor

Distributed by Tribune News Service.

This story was distributed by TNS - Tribune News Service
Refinance News
News about refinance programs, pricing and production.
H A R P 2.0 News
News stories about the H o m e Affordable Refinance Program including expanded program guidelines.

Copyright © 2016 Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

pricing engine directory

wholesale lender directory

More Mortgage News Resources ( full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

free mortgage news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter


mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

refinance news

reverse mortgage news

sales blog

secondary marketing

servicing news

subprime news

wholesale lenders

wireless mortgage news