It’s a HECM
There is a great deal of information about reverse mortgages out there. Family, friends, financial bloggers, and industry advertising add to the mix. Not all is current or accurate and a lot of it is scary. That is why it is best to start by explaining that while Home Equity Conversion Mortgages (HECM’s) are reverse mortgages, not all reverse mortgages are HECM’s.
Reverse mortgage is a generic term that has been used to describe all sorts of things including negative amortization mortgages and life estates. They’ve been around for a long time.
HECM’s are a newer product and are insured with the Federal Housing Administration (FHA). They are not an entitlement program or part of the federal deficit. FHA is an income-producing arm of the government. The insurance and FHA’s rules make HECM’s safe.
FHA insurance protects the borrower and his/her heirs from owing more than the home will sell for. It also protects the credit line. Unlike regular equity lines, the lender can’t cancel out the credit line, even if home values fall or the borrower has credit problems (as long as the home remains the primary residence, and homeowner’s insurance and property taxes are paid). If the lender ever fails to extend the borrower funds, all responsibilities and liabilities fall to FHA.
So, don’t just look for a reverse mortgage. Look for a Home Equity Conversion Mortgage, the one you can count on.