Reverse Mortgage

Page 2

Three Basic Types of Reverse Mortgages are:

1) Single purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations, generally have very low costs, are not available everywhere, and they only can be used for one purpose specified by the government or nonprofit lender, for example, to pay for home repairs, improvements, or property taxes. In most cases, you can qualify for these loans only if your income is low or moderate.

2) Federally insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECMs), and are backed by the United States Department of Housing and Urban Development (HUD), and

3) Proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.

HECMs and proprietary reverse mortgages tend to be more costly than other home loans, the up front costs can be high, so they are generally most expensive if you stay in your home for just a short time. They are widely available, have no income or medical requirements, and can be used for any purpose.

Before applying for a HECM, you must meet with a counselor from an independent government approved housing counseling agency. The counselor must explain the loan's costs, financial implications, and alternatives. For example, counselors should tell you about government or nonprofit programs for which you may qualify, and any single purpose or proprietary reverse mortgages available in your area.

The amount of money you can borrow with a HECM or proprietary reverse mortgage depends on several factors, including your age, the type of reverse mortgage you select, the appraised value of your home, current interest rates, and where you live. In general, the older you are, the more valuable your home, and the less you owe on it, the more money you can get.

The HECM gives you choices in how the loan is paid to you. You can select fixed monthly cash advances for a specific period or for as long as you live in your home. Or you can opt for a line of credit, which allows you to draw on the loan proceeds at any time in amounts that you choose. You also can get a combination of monthly payments plus a line of credit.

HECMs generally provide larger loan advances at a lower total cost compared with proprietary loans. But owners of higher valued homes may get bigger loan advances from a proprietary reverse mortgage. That is, if you have a higher appraised value without a large mortgage, then you may likely qualify for greater funds. Location (for example, your neighborhood) is only one part of the determination of appraised value.

In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.

Page 1 Reverse Mortgage
Page 3 If you are considering a reverse mortgage, Be Aware

References:
Federal Trade Commission (FTC)
www.ftc.gov

SCAMS & FRAUD
Some Scams, Fraud, and Consumer Abuse Items in the News

Federal Laws
Major Laws That Govern Financial Institutions & Protect Individuals in Their Financial Dealings

Organizations

Fannie Mae
Freddie Mac
Ginnie Mae
Nellie Mae
Sallie Mae

Consumer Info

Consumer Tips
Credit Bureau
Credit Insurance
Credit Report
Directory of Federal Agencies
Federal Trade Commission (FTC)
Identity Theft
Predatory Lending
Repair Your Bad Credit
Truth in Lending Act
Borrowers Beware

Miscellaneous

Private Mortgage Insurance (PMI)
Prepayment Penalty

Loanfactz.com Supporters