Reverse Mortgage Safeguards and Borrower Protections
Information
accurate as of
May 31, 2019
in Blog

Reverse Mortgage Safeguards and Borrower Protections

Safeguard and Protection

Your home is probably one of your largest assets so it’s understandable that choosing to get a loan or tap into your home’s equity is a big decision.  If you’re a senior homeowner researching financial options, it may be helpful to learn about the built in safeguards that protect you as a borrower if you choose to obtain a Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage loan.

Federal Housing Administration (FHA) Insured¹

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

Mandatory Mortgage Insurance

One of the requirements for FHA insurance, is that the borrower is charged an up-front mortgage insurance premium (MIP) fee at closing and, over the life of the loan, is charged an annual MIP fee on the loan balance. This insurance protects the borrower and their heirs in the event the loan balance is higher than the home’s value when the loan becomes due and payable. 

Independent Counseling

Independent counselors which are approved by Department of Housing and Urban Development (HUD) provide you with objective information, and help you understand the process.

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

Your home is probably one of your largest assets so it’s understandable that choosing to get a loan or tap into your home’s equity is a big decision.  If you’re a senior homeowner researching financial options, it may be helpful to learn about the built in safeguards that protect you as a borrower if you choose to obtain a Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage loan.

The HECM loan can be repaid at any time in part or in full, without penalty.

Non-Recourse Loan

No assets other than the home may be used to repay the debt.

Eligible Non-Borrowing Spouse Protection

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 more about the HECM product, call 1-800-976-6211 to speak with a licensed loan officer who can answer your questions.  You can also fill out the form above to see how much you may be eligible for. 

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.