A Home Equity Conversion Mortgage (HECM) loan, also known as a reverse mortgage loan, is insured by the Federal Housing Administration (FHA)1 who regulates the HECM loan requirements to safeguard borrowers and lenders. Thus, it is important for borrowers to understand how a reverse mortgage works.
Can I Lose My Home?
Yes, it is possible you can lose your home with a reverse mortgage. However, there are only a few circumstances when it can occur:
- The home is no longer your primary residence.
- The home is sold, or you permanently move away.
- You do not reside in your home for more than six months of the year for non-medical reasons.
- You pass away, and your spouse or partner is not listed on the loan as a co-borrower or non-borrowing spouse. If your heirs are listed on your estate, the loan may become due and payable.
- You stop paying property taxes and homeowner’s insurance and don’t maintain the home according to FHA requirements.
Failure to meet these requirements can trigger a loan default that may result in foreclosure.
Know Your Loan Obligations
To ensure your reverse mortgage loan is in good standing, you must continue to meet the following FHA requirements.
- Own and live in your home as your primary residence.
- Pay property taxes and homeowners insurance.
- Maintain your home according to FHA requirements.
The FHA and reverse mortgage lenders do not want seniors to lose their homes. To make sure you make an educated decision about a reverse mortgage loan, HUD requires mandatory counseling by an impartial HECM counselor as part of the application process.2 The counselor will review program eligibility requirements, the financial implications and alternatives to obtaining a reverse mortgage loan, and requirements for the mortgage when it becomes due and payable.
If you are interested in learning more about a reverse mortgage, call 1 (800) 976-6211 to speak with a licensed loan advisor.
1As required by the Federal Housing Administration (FHA), you will be charged an initial 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.
2The U.S. Department of Housing and Urban Development (HUD) provides a list of approved reverse mortgage counseling agencies for you to choose from. The purpose of this requirement is so you are aware of all of your options and can evenly weigh the pros and cons of each.