Reverse Mortgages

What is a Reverse Mortgage?
A Reverse Mortgage is a special type of loan used by older Americans to convert the equity in their homes into cash. The money from a reverse mortgage can provide seniors with the financial security they need to fully enjoy their retirement years. The Reverse Mortgage is aptly named because the payment stream is "reversed." Instead of making monthly payments to a lender, as with a regular first mortgage or home equity loan, a lender makes payments to you. While a reverse mortgage loan is outstanding, you continue to own the home and hold title to the home. The money from a reverse mortgage can be used for ANYTHING: daily living expenses; home repairs and home modifications; medical bills and prescription drugs; pay-off of existing debts; continuing education; travel; long-term health care; prevention of foreclosure; and other needs.

As part of the qualification process, the client will also speak to a HUD approved third party counselor.

Types of Reverse Mortgage Products

HECM - The Home Equity Conversion Mortgage(HECM) is the oldest and most popular reverse mortgage product. Available since 1989 to homeowners 62 or older, HECMs are insured by the federal government through the Federal Housing Administration. (FHA), a part of the U.S. Department of Housing and Urban Development. Eligible home types include single-family homes, manufactured homes built after June 1976, condominiums, and town homes.

FNMA Home Keeper - In 1996, Fannie Mae developed its own proprietary Home Keeper mortgage as a supplement to the Home Equity Conversion Mortgage. Home Keeper was developed to address needs that could not be met by the HECM program, such as individuals with higher property values, some condominium owners, and seniors wishing to use a reverse mortgage to purchase a new home. The Home Keeper mortgage is available in every state to borrowers 62 and older. Eligible home types include owner-occupied single-family homes, condominium units, and units in qualified planned unit developments. Properties held in trust and qualified properties are also eligible. Cooperative units, however, are not.

Cash Account Plan - Another proprietary reverse mortgage product is the Cash Account Plan. Financial Freedom is a subsidiary of Lehman Brothers Bank, FSB. The Cash Account (CA) plan is available to seniors 62 years or older who own their home with a minimum value of $75,000. It provides an open-end line of credit (i.e., the consumer can borrow, repay, and borrow again) that is available for as long as the borrower occupies the home. The senior can draw on the line of credit in full or part at any time; the minimum draw is $500. The unused portion of the credit line grows 5% annually until maturity.