Reverse mortgage consumer safeguards protect senior homeowners

There are numerous safeguards in today’s reverse mortgage programs that protect senior homeowners.

The federal government implemented reverse mortgages with the Home Equity Conversion Mortgage (HECM) Program under the U.S. Department of Housing and Urban Development (HUD) as part of the 1987 Housing and Community Development Act.

A reverse mortgage is a loan that enables homeowners 62 or older to borrow against the equity in their home without having to give up title, or take on a new monthly mortgage payment. The money received can be used for any purpose. The loan amount depends on the borrower’s age, current interest rates, and the value of the home.

The homeowner must remain current on property taxes and insurance. A reverse mortgage does not have to be repaid until the borrower sells or moves out of the home permanently, and the repayment amount cannot exceed the value of the home. After the loan is repaid, any remaining equity is distributed to the borrower or the borrower’s estate.

Among Home Equity Conversion Mortgage’s consumer safeguards are several important features:

Counseling: Borrower must meet with an independent reverse mortgage counselor.

Limitation on fees charged: Fees are limited by HUD regulations and may be financed.

Disclosure of costs: The Total Annual Loan Cost disclosure displays the total transaction costs. A borrower is made fully aware of the costs incurred.

No prepayment penalty: The loan can be paid-off at any time with no additional costs.

Three-day rescission right: Even after the loan closes, the borrower has up to three days to cancel the transaction.

Asset protection: The amount due can never exceed the value of the home and title to the home remains with the borrower.

For a more information, call David Chee, NMLS #263222, Branch Manager and Certified Public Accountant at (800) 9673575. HighTechLending, Inc., Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act. #4130937 NMLS #7147. Equal Housing Lender. NMLS Consumer Access: www.nmlsconsumeraccess.org. This material is not from HUD for FHA and was not approved by HUD, FHA or any other government agency.