home equity conversion mortgage

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Reverse Mortgage

A loan borrowed against the value of one's home. In this situation, the lender gives the borrower the amount of the loan and the borrower makes no payments and retains title to his/her home. When the borrower moves from the house or dies, the lender takes possession of the home, which it then sells to repay the loan. Any extra profit is remitted to the borrower or his/her estate. A lifetime reverse mortgage allows a homeowner to access his/her home's equity without the inconvenience of moving. It is a financial instrument designed to help homeowners who are cash poor, and is limited to senior citizens. In the United States, one must be 62 years old in order to be eligible for a lifetime reverse mortgage, while the U.K. requires potential borrowers to be at least 55. It is also known as a lifetime reverse mortgage.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

home equity conversion mortgage (HECM)

An FHA-insured reverse mortgage loan allowing persons to borrow money against the equity in their home with no repayment usually necessary until after death.The money may be taken in one lump sum,or in payments over time.

The important elements are

• The borrower and any other current owners of the home must be aged 62 or over and live in the home as their principal residence.

• The home must be a single-family residence in a one- to four-unit building, a condomini- um, or part of a planned unit development (PUD). Some manufactured housing is eligible, but cooperative apartments are not.

• The home must be at least 1 year old and must meet HUD minimum standards, except that the HECM can be used to make necessary repairs.

• Applicants must discuss the program with a HUD-approved counselor before making any decision.

• Repayment in full is due (1) when the last surviving borrower dies, (2) when the home is sold, (3) when the borrowers permanently move elsewhere or fail to live in the home for 12 months, or (4) if there is a default in mortgage terms, such as failing to pay property taxes or keep the property insured or allowing it to deteriorate below HUD minimum standards.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.

Home Equity Conversion Mortgage (HECM)

A reverse mortgage program administered by FHA.

See Reverse Mortgage/FHA's Home Equity Conversion Mortgage (HECM).

The Mortgage Encyclopedia. Copyright © 2004 by Jack Guttentag. Used with permission of The McGraw-Hill Companies, Inc.
References in periodicals archive ?
HECMs are complicated, and the FHA requires counseling (at a cost of $150) prior to any purchase.
Congress created the HECM in 1987 to help seniors whose retirement savings had fallen short.
3, June 2014, at 26 ("There are three types of reverse mortgages: the Home Equity Conversion Mortgage ('HECM'), the proprietary reverse mortgage [i.e., reverse mortgages for amounts higher than permitted for HECMs], and the single-purpose reverse mortgage [e.g., a reverse mortgage granted through a state or local program to use for paying real estate taxes].").
The four Re-REMIC classes reviewed are straight pass-throughs from HECM transactions included in this review.
2008, Moving Beyond HECM in Equity Release Markets?, Oliver Wyman Financial Services.
Clients can use the reverse mortgage in combination with their retirement portfolios to pay off an existing mortgage, fund home renovations to age in place or to use the HECM to buy a new home.
"Our HECM products enable financial institutions to easily incorporate reverse mortgages into their offering.
As of June this year, 9.8 percent of all active HECM loans were delinquent, according to HUD, which regulates the loans.
* The leading product, the Home Equity Conversion Mortgage (HECM), is insured by the federal government and limits the payback amount to the value of the home at the time the loan is due.
A recent study by the MetLife Mature Market Institute found that younger seniors are now seeking a Home Equity Conversion Mortgage (HECM), otherwise known as a reverse mortgage (RM).
Although a new lower-fee RM model, the HECM Saver, has been introduced, the cost of a reverse mortgage can be high, Heitman maintains.
The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.