SolveYourProblem Home Loan & Home Mortgage Article Series
Reverse Mortgages:
Home Equity Conversion Mortgage (HMEC)

All reverse mortgage products have the same basic function. They allow you to tap into your home’s equity and receive funds in a predetermined manner. Depending on your circumstances, you may receive a certain amount of money from one option and a smaller amount from another.

The option you chose is significant. Without knowledge of all available options, you could receive thousands of dollars less.

HEMC Product Profile

The Home Equity Conversion Mortgage, or HMEC, is the only reverse mortgage program insured by the federal government. It is available through the Federal Housing Administration (FHA), a division of the US. Department of Housing & Urban Development also know as (HUD).

Over 95% of all reverse mortgage borrowers choose the Home Equity Conversion Mortgage product. What makes it so popular? FHA provides insurance. And, unless you have a high valued home, you generally get more money. This is because the Federal government insures this product. It is considered the safest reverse mortgage product currently available.

Mortgage insurance is the safety measure that ensures you will always receive your reverse mortgage funds as long as you maintain primary residence in that particular home. For example, if your lender refuses to continue monthly payments, or if your lender is no longer in business, you would continue to receive your monthly payments through FHA.

Mortgage insurance also protects the lender; it ensures that the lending institution will receive the total repayment of the reverse mortgage balance, even if your home’s value is less than the total amount due. As long as you occupy the home as your primary residence, you will not be forced to sell. The FHA insurance guarantees that the lender will receive its full payment, and neither you nor your heirs will be held financially responsible if your loan balance exceeds your home’s value.

Eligibility of a Home Equity Conversion Mortgage

The Home Equity Conversion Mortgage product includes eligibility requirements beyond the general requirements that are usually needed for other reverse mortgage products. If you are delinquent on a debt related to a federal agency such as a VA-guaranteed mortgage, Federal student loan, Small Business Administration loan or Title 1 loan, your social security number is added to this database. Your lender will check this list for your social security number. If your number appears, you will not be able to receive a HEMC reverse mortgage or any other type of federal loan. Your social security number must be off this list for at least 36 months before you are eligible for any HUD insured loan or mortgage.

Home Equity Conversion Mortgage – Minimum Property Standards

Under the HECM program, potential properties must meet HUD’s minimum property standards. These standards were established as a guide for all buildings and homes that participate in HUD housing programs.

Because the collateral for a reverse mortgage is your home and nothing else, the FHA must take precautions to protect its “investment”. Once you have completed the initial paperwork, an FHA approved appraiser will inspect your home from the exterior paint to the kitchen cabinets and carpeting. If the appraiser discovers any deterioration in the interior and exterior of your home, it will be noted within the appraisal.

If the appraiser notes any physical conditions that do not meet HUD standards, you will be required to fix the problems before your reverse mortgage process is completed.

Always keep in mind that your reverse mortgage balance is equal to the total amount borrowed, plus interest and other costs such as servicing fees, origination fees, insurance premiums, and, if applicable, costs from cosing.

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SolveYourProblem.com : 2007

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