Reverse Mortgage Safeguards
This is important because your home is your largest asset and ought to be aware of how home financing protects you and your future.
- Regulated by Department of Housing and Urban Development (HUD)
It takes an act of Congress or regulatory change for there to be changes made to the program.
- Insured by the Federal Housing Administration (FHA)
The Home Equity Conversion Mortgage or HECM loan is insured by the Federal Housing Administration or FHA. You are protected against lender insolvency and can count on receiving your proceeds.
- No Pre-Payment Penalty
You can choose to repay the loan at any time without incurring any additional costs.
- Non-recourse Loan
HECM loans are non-recourse loans in which you or your heirs can never owe more than what the house is worth when the loan is repaid. After the loan is paid off, any remaining equity belongs to you or your heirs.
- Independent Counseling
All HECM mortgage applicants attend independent third-party counseling to ensure borrowers understand the HECM program.
- HUD Fee Limitations
HECM origination fees are regulated by HUD and range from $2500 to $6,000 depending upon the value of the home. Other HECM costs may vary among vendors and loan types. You will receive a clear breakdown detailing all the fees.
- Non-Borrowing Spouse Protections
A HECM loan is available even if one spouse is not yet 62 years old, and new protections are in place to protect the non-borrowing spouse.
- Financial Assessment
Important safeguards during the loan qualification process help determine if you are willing and able to meet financial obligations.
- Life Expectancy Set Aside (LESA)
LESA uses HECM proceeds to pay taxes and insurance. This may be required based on your financial situation or you can request a LESA to help with cash flow.
- Maturity Date
The program is designed so the borrower cannot outlive it. The term of the loan is age 150 of the youngest borrower.
- Equity Protection
A reverse mortgage protects some of a borrowers equity from any real estate market.
Since it’s inception in the 1960s, the reverse mortgage product has become safer and more beneficial to the borrower. I’d recommend this financial product to my own mother, that’s how safe it is.