What is HECM?

What is a Home Equity Conversion Mortgage Loan?

HECM (pronounced “heck-em”) stands for the Home Equity Conversion Mortgage and is the reverse mortgage loan offered by the Department of Housing and Urban Development (HUD) and is insured by the Federal Housing Association (FHA). Reverse mortgages are meant to allow seniors, 62 years and older to age in place. With their reverse mortgage loans, they are able to take out a portion of the equity on their property and turn it into cash. According to HUD, while there are private reverse mortgage loans available, about 99% of reverse mortgages are insured by the FHA.

The FHA’s role in the reverse mortgage industry is to insure the reverse mortgages in order to protect both the borrower(s) and the lender(s). For example, if the borrowers were to exceed the value of the property, then the FHA will cover the losses to the lenders. The FHA is also obligated to cover the costs of payments due to the borrower(s) in the event the lender does not.

With HECM being regulated by HUD, it is required that borrowers who are looking to apply for a reverse mortgage go with a third party HUD-approved reverse mortgage counselor. This is to ensure that the borrower(s) have an understanding of the reverse mortgage process from an unbiased source.

Even though it is a product insured by the Federal Housing Association, the government is not directly involved with providing reverse mortgages to consumers. With a federally insured reverse mortgage, both consumers and lenders will benefit by the protection set up by the FHA.

If you have any more questions about reverse mortgages, you can speak with an advisor at 1-888-808-8486.

 Read Related Posts:

What is the Difference Between a Reverse Mortgage & a Home Equity Loan?

5 W’s of Reverse Mortgages

About the Author:

I have been working in the reverse mortgage industry for 20-plus years. My goal is to provide consumers the most up-to-date and relevant information about the reverse mortgage industry and how it can affect them.

Thanks so much for reading!

-Alan F.

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