YES! FHA guarantees that the borrower can never owe more than the home is worth at the time it is sold.
This is a non-recourse loan!
This is one of the most powerful aspects of a reverse mortgage. FHA Guarantees that neither the borrower nor the heirs will owe more than the home is worth at the time it is sold.
Over time, the loan balance of a reverse mortgage will rise if you choose not to make a payment. It’s flexible: you can pay down the loan entirely or partially or not all while you occupy the home. The lender only has your property as security for their loan. They have no other way to obtain repayment of the principal, interest, and mortgage insurance fees in the event something happens and your home is not worth enough to pay off all the entire obligation. There is no recourse to the estate. However, when the loan is due and payable and there is EQUITY left in the estate that EQUITY belongs to the estate, not to the lender.
Too good to be true? FHA collects mortgage insurance premiums as part of your closing costs. FHA’s mutual mortgage insurance fund is a pool of funds created for this purpose.
HUD participates in regulating the program and the industry to protect you; therefore, all reverse mortgage applicants must complete a HUD Counseling session before application. Seniors are a protected class!
If the borrower is incompetent and there is a Power of Attorney agent, the POA must complete HUD counseling. If there is a Conservator in place that individual must receive HUD counseling on behalf of their client/borrower. There are many requirements of the POA and the Conservator by the lender to mitigate fraud which must be presented at application. Protections for older adults are throughout the process of obtaining a reverse mortgage.
Education is a critical component to a reverse mortgage: To learn more about reverse mortgages, contact your local certified Reverse Mortgage Professional (CRMP) for guidance and expertise.