Never has a loan product been more misunderstood than a (HECM) Reverse Mortgage. Most of my clients come in skeptical, bewildered and confused as they start their journey. During the initial consultation, we explain in detail how the Reverse Mortgage loan works and the qualification process. Then, we provide a quote package that outlines one’s specific situation to determine which HECM product is the best for their situation. As the initial consultation moves on, and my client realizes that this product may solve many of their current financial challenges, their facial expression changes to optimism and hope.
FHA’s Home Equity conversion Mortgage (HECM) is a creative way of
helping seniors use one of their most valuable assets as leverage to help live a better life. The concept is simple, but for many just seems too good to be true. And for good reason, it just doesn’t seem logical that a bank will give someone a loan that they don’t need to make payments on. And that’s precisely where the creative nature of the product is so beneficial to the consumer.
There is a new financial assessment standard that has been added to the qualification process. The new standard considers income and liabilities, assets and past credit challenges. If a borrower doesn’t meet this standard, then a set aside may be required. This set aside is designed to help the borrower meet future financial obligations like property taxes and home owner’s insurance.
Once we feel that you understand the product and how it can work for you, we then provide a list of HUD approved HECM counseling agencies. HUD requires that a counseling session be conducted for all reverse mortgage programs. It must be done by an independent, objective housing counseling agency, approved by FHA. There is a fee involved, paid directly to the counseling agency. The session will last about 30-45 minutes and may be done in person or over the phone. The U.S. Department of Housing and Urban Development (HUD) has established this counseling requirement to ensure that all clients have been properly educated about the program.