Safeguards for Reverse Mortgage Borrowers

For many senior homeowners, their home is probably one of their largest assets, and it’s a big decision deciding whether to get a loan or tap into their home’s equity when additional income is needed.  A Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage, maybe the financial option you are looking for with built-in safeguards that protect you as a borrower.

Insured by the Federal Housing Administration (FHA)¹

HECM loans are FHA-insured.¹ As a borrower, you are always protected against lender insolvency and continued access to your available equity.²

Required Mortgage Insurance Premium (MIP)

A requirement for FHA insurance is borrowers are charged an up-front mortgage insurance premium fee at closing and, over the life of the loan, charged an annual MIP fee on the loan balance. This insurance protects you and your heirs if the loan balance is higher than the home’s value when the loan becomes due and payable.

Mandatory Counseling

Reverse mortgage counseling is a requirement of the application process.  Independent HUD-approved counselors provide homeowners with unbiased information about reverse mortgage loans.

You can complete the required counseling over the phone or face-to-face with a local agency. Upon completion, the counselor will mail a HECM Counseling Certificate to the homeowner for inclusion with the reverse mortgage application.

Capped Interest Rates  

If your loan has an adjustable interest rate, there is a limit on how much the interest rates can change each time it adjusts, as well as over the life of the loan.

No Prepayment Penalty

A reverse mortgage loan can be repaid at any time in part or in full, without penalty.

Non-Recourse Loan

HECM’s are non-recourse loans. If the home is sold to repay the loan, borrowers won’t owe more than the loan balance or the value of the property (whichever is less) with no assets other than the home is used to repay the debt.

Eligible Non-Borrowing Spouse Protection

For HECM loans insured by the FHA, an individual who is married to a reverse mortgage applicant and is living in the home as their primary residence is known as an eligible non-borrowing spouse. Upon passing of the last remaining borrower, an eligible non-borrowing spouse may be able to have the repayment of the reverse mortgage deferred if certain requirements are met.³

If you are interested in learning if a reverse mortgage loan is right for you, call 1-800-976-6211 to speak with a licensed reverse mortgage specialist.

Disclosures:

¹ As required by the Federal Housing Administration (FHA), you will be charged an up-front mortgage insurance premium (MIP) at closing and, over the life of the loan, you will be charged an annual MIP based on the loan balance.

² Access to available equity after closing only applies to adjustable-rate HECMs loans.

³ A spouse must meet the following requirements to be considered eligible: 1) Be the spouse of the reverse mortgage borrower at the time of loan closing and remain the spouse of the borrower for the duration of the borrower’s lifetime. 2) Be properly disclosed to the lender at origination and specifically named as a Non-Borrowing Spouse in the loan documents. 3) Occupy, and continue to occupy, the property securing the reverse mortgage as the principal residence.