HECM REVERSE MORTGAGE

HUD & FHA INSURED PROGRAM

Homeowners 62 and older who have paid off their mortgages or have only moderate mortgage balances remaining are                      eligible to participate in HUD's reverse mortgage program. The program allows homeowners to borrow against the                           equity in their homes.

Homeowners can receive payments in a lump sum, on a monthly basis (for a fixed term or for as long as they live in                           the home), or  as a line of credit. Homeowners whose circumstances change can restructure their payment options.

Unlike ordinary home equity loans, a HUD reverse mortgage does not require repayment as long as the borrower lives in the home. Mortgage companies recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to their aires. If the sales proceeds are insufficient to pay the amount owed, HUD will pay the company the amount of the shortfall, these are no recourse loans. The Federal Housing Administration, which is part of HUD, collects an insurance premium from all borrowers to provide this coverage.

The size of reverse mortgage loans is determined by the borrower's age, the interest rate, and the home's value. The older a borrower is the larger the percentage of the home's value that can be obtained.

For example, based on a loan at an interest rate of 6 percent, a 65-year-old could borrow up to 59% of the appraised value. There are no asset or income limitations on borrowers receiving
HUD's reverse mortgages.

                           There are also no limits on the value of homes qualifying for a HUD reverse mortgage. However, the amount that t                          be borrowed is capped by the maximum FHA mortgage limit for the area, which varies  county, depending on local           h                         housing costs. As a result, owners of higher priced homes can't borrow any more than owners of homes valued at the a                         FHA limit.

                           HUD's reverse mortgage program collects funds from insurance premiums charged to borrowers. Senior citizens are a                         charged 2 percent of the home's value as an up front payment plus one half percent on the loan balance each year. T                         These amounts are usually paid by the mortgage company and charged to the borrower's principal balance.

FHA's reverse mortgage insurance allows Senior’s to receive more cash at a low interest  than privately backed reverse mortgage programs run by private companies without FHA insurance.