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Detailed Description of HECM Product
HECM is the government sponsored and government guaranteed program that is the original
reverse mortgage product.
To qualify for a HECM reverse mortgage the following is necessary:
All persons named on the title must be at least 62, there is no maximum age.
One person minimum must call the home their permanent residence.
One person minimum must live in the home for some period every year.
There must be sufficient equity in the home to justify a reverse mortgage.
Example: approximately 50% equity at age 80
approximately 65% equity at age 62
IMPORTANT!
The homeowner continues to own the home; it is not transferred to the bank.
The homeowner continues to profit from increases in equity, not the bank.
There are no taxes paid on the money from a reverse mortgage.
This is a “non-recourse” loan, which means that no asset of the homeowner is pledged except
the equity in the home. Nothing else is involved, ever.
CHOICES!
There are three ways to receive money from a reverse mortgage:
1. All cash in one lump sum paid at funding.
2. All funding put on a line of credit useable whenever needed.
3. All funding paid in monthly installments for either a set term of time or for the full period
that any named participant lives in the home.
4. OR, AT YOUR CHOICE, ANY COMBINATION OF THE ABOVE.
5. Additionally, at the homeowners’ choice, whatever method is chosen can be changed
later, with no penalty.
6. The reverse mortgage can be paid off in full, at any time, with no prepayment penalty.
PROTECTIONS!
There are several protections that are built into a HECM reverse mortgage
1. Before a reverse mortgage can be even initiated the homeowner must receive a
counseling session by an independent organization, to assure that the homeowner knows both
the plusses and minuses of a reverse mortgage before they commit to one. The counseling
session can be either by phone or face-to-face, at the homeowners choice.
2. HUD mandates that the provider of a reverse mortgage be limited to the percentage of
profit that HUD determines and only that be charged and that no “frivolous” or “junk” fees are
allowed.
3. Part of a reverse mortgage is a guarantee by HUD that the homeowner can never outlive
the equity in their home. HUD guarantees that, if the choice is monthly payments they will
continue as long as a participant lives in the home, regardless of how much equity might remain,
or if any at all. HUD also guarantees that the funding agency will be paid what it is owed,
eventually, and that if the funding agency ever fails then HUD will assume the reverse mortgage
and continue to honor it fully.
OTHER QUALIFICATIONS!
There is no age limit for obtaining a reverse mortgage.
There is no health requirement for obtaining a reverse mortgage.
There is no income requirement for obtaining a reverse mortgage.
There is no credit or other additional equity needed to qualify.
OTHER FACTS ABOUT REVERSE MORTGAGES!
A reverse mortgage does not affect your Social Security eligibility or payment.
A reverse mortgage does not affect your Medicare eligibility in any way.
There are no restrictions on how you use the funds received.
The maximum amount fundable is determined on a county by county basis.
The types of homes that are eligible for a reverse mortgage are:
Single Family Residence (SFR)
Condominiums and Townhomes
1-4 unit houses
Planned Urban Development (PUD)
Mobile home, only if on singly owned land & with approved foundation
(No homes under construction or to pay off building contractor allowed)
ADDITIONAL FACTS ABOUT REVERSE MORTGAGES!
The only out of pocket expense paid by the homeowner is for the original appraisal, no other
charges are allowed by HUD.
The homeowner must maintain current taxes paid and homeowners insurance on the home and
continue reasonable maintenance on the home.
PRACTICAL LIMITS OF HECM’S!
With the maximum lending limit established by HUD, the practical maximum home evaluation to
obtain a HECM is about $600,000, and homes over $362,790 do not increase the amount to be
received. Commercial reverse mortgages (see COMMERCIAL PRODUCTS) are available with no
lending limits. This maximum will change to at least $417,000 when the new "FHA Modernization
Bill" is passed by Congress and implemented by FHA.
CLOSING OUT OF THE REVERSE MORTGAGE!
The reverse mortgage is due on one of the following events:
When the last person named on the deed permanently moves away.
When the last person named on the deed passes.
If the taxes, insurance and maintenance aren’t maintained.
If the homeowner is absent from the property for more than one year.
When the reverse mortgage is closed out the following transpires:
The person has the choice of:
Keeping the home and paying off the amount of the loan.
Selling the home and paying off the loan.
Money in excess of the loan payoff is the homeowners.
If the home passes to heirs the following transpires:
The heirs have the choice of keeping the home by paying off the
loan amount or selling the home and paying off the loan.
If there is money left over after the loan is paid off, the
remaining amount is the property of the heirs or the estate.
In all cases, the homeowner owns the home and is due all monies in
excess of the loan payoff, as the home and its equity remains the
homeowners at all times.
Other terms and conditions apply as specified by HUD and the lending agency and are subject to
change at their direction. Original interest rate is adjusted weekly and subject to change
monthly on variable HECM's, established at time of inception on "Fixed Rate" HECM's
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