FHA insured reverse mortgages or Home Equity Conversion Mortgages (HECM) come with a number of guarantees and protections that are part of the FHA (Federal Housing Administration) insurance. The FHA insurance provides the following protection and peace of mind to the borrower and their children:
- The borrowers will never owe more than the home’s fair market value.
- If the loan balance ever grows higher than the value of the home, FHA pays the lender the difference when the last borrower dies or leaves the home.
- Payments taken from the bank holding the reverse mortgage are guaranteed. If the bank ever goes into default, the payments are guaranteed to be made by FHA.
- If the loan balance grows higher than the home’s value, the lender cannot take title. FHA insures that you can live in your home as long as the basic loan obligations are met; payment of home owners insurance, property taxes, and normal home maintenance.
- If there is a line of credit and funds are available, property taxes, home owners insurance and other applicable property charges are current, the home owner occupies the property ( thus there are no defaults) then the available funds are guaranteed even if the home value decreases or the econonomic environment is tightening.