Chap 2: Home Equity Conversion Mortgage HECM

Question 1

What is HECM?

Answer 1

Type of reverse mortgage that is fully insured by FHA. HECM allows seniors to convert the equity in their homes into cash
The total amount of loa that a senior can borrow depends on the appraised value of home
62 years
After the loan is made, interest accrues but the borrower makes no payments until the home is sold, moves out of the property or dies - at this time, the entire loan needs to repaid.

Question 2

Cap on HECM

Answer 2

a cap on the maximum amount of the loan. Plus all borrowers need PMI

Question 3

HECM is similar to HELOW

Answer 3

It is similar to home equity loan since borrowers accept cash advances based on the equity of the home. However, with home equity loan , the borrower usually repays the money in monthly payments after the loan is given

Question 4

Loan sponsership

Answer 4

It is sponsored by the FHA, which sets eligibility criteria and limits on the loans. Borrowers can only obtain HECMs from financial institutions where FHA sponsors the financial products. To qualify for a HECM, the borrow must complete an application form and meet the requirements.

Question 5

Requirements

Answer 5

Be the owner of the property or have paid a significant amount of money toward the property
Be at lease 62 years old
Not have any federal debt
The property is primary residence
Engage in an interactive consumer information session with a counselor provided by the Housing and Urban development
Be able to make regular payments on the insurance, property taxes and HOA fees

Question 6

Additional requirements

Answer 6

Single family homes or it can be a two to four unit home.
The borrow must be a resident in one of the units for eligibility since this is not an investment loan.
An FHA or HUD approved condominium
A manufactured home that meets FHA requirements.

Question 7

Difference between HECM and a Reverse Mortgage

Answer 7

All HECM are considered to be reverse mortgages, but on the other hand, not all reverse loans are home equity conversion mortgages.
HECM is insured by FHA but it is only issued by a lender approved y the FHA.

Question 8

Consume can loose home with HECM

Answer 8

The fact is consumers should know that with a HECM reverse mortgages, it is possible to lose the home. If the owner fails to maintain the property, not pay property taxes or insurance, the home can be seized. If the property is no longer the primary residence for more than 12 consecutive months or even if the individual is admitted to a nursing home, hospital or long term facility, he or she can loose the home if the balance on the reverse mortgage is not paid.