The Home Equity Conversion Mortgage (HECM)

The HECM is the only reverse mortgage insured by the federal government. HECM loans are insured by the Federal Housing Administration (FHA), which is part of the U.S. Department of

Housing and Urban Development (HUD). The FHA tells HECM lenders how much they can lend you, based on your age and home value. The HECM program limits your loan costs, and the FHAguarantees that lenders will meet their obligations.

HECMs Versus Other Reverses

HECM loans generally provide the largest loan advances of any reverse mortgage. HECMs also give you the most choices in how the loan is paid to you, and you can use the money for any purpose. Although they can be costly, HECMs are generally less expensive than privately

insured reverse mortgages. These other reverse mortgages may have smaller fees, but they generally have higher interest rates. On the whole, HECMs are likely to cost less in most cases. A notable exception may be the reverse mortgages now being developed by some credit

unions. The only reverse mortgages that always cost the least are the ones offered by state or local governments. These loans typically must be used for one specific purpose only; for example, to repair your home or to pay your property taxes. They also generally are available only to homeowners with low to moderate incomes. Part 4 of this booklet discusses reverse mortgages other than HECMs.

HECM Eligibility

HECM loans are available in all 50 states, the District of Columbia, and Puerto Rico.

To be eligible for a HECM loan:

• You, and any other owners of your home, must be aged 62 or over, live in your home as a principal residence, and not be delinquent on any federal debt.

• Your home must be a single-family residence in a 1- to 4-unit dwelling, or part of a planned unit development (PUD) or a HUD-approved condominium. Some manufactured

homes are eligible, but most mobile homes are not. Cooperatives are expected to become eligible by the end of 2008.

• Your home must meet HUD’s minimum property standards, but you can use the

HECM to pay for repairs that may be required.

• You must discuss the program with a counselor from a HUD-approved counseling agency; information on HECM counseling appears in Part 5 of this booklet.