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 ?
Is a "first" mortgage that requires a payment or is a Home Equity Conversion Mortgage the best decision for you?
HUD administers the Home Equity Conversion Mortgage (HECM) program, within which better than 95 percent of all reverse mortgages originate.
It is important to note that a Home Equity Conversion Mortgage (HECM) is not about equity stripping, taking money out of your house or losing your home.
Department of Housing and Urban Development, which oversees the Home Equity Conversion Mortgage program that insures most reverse mortgages, implemented changes that made the loans safer and, in some cases, cheaper.
Then there's another type of mortgage that was designed for those 62 and older -- the home equity conversion mortgage (HECM).
There was some recent research that showed those who establish a "standby" reverse mortgage, or home equity conversion mortgage (HECM) as the FHA version is officially known have the highest probability of not outliving their money over a 40 year period.
The Home Equity Conversion Mortgage (HECM) has set the standard for reverse mortgages and has been gaining in popularity.
The most common, the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA), enjoyed a resurgence in the early years of this decade and has been showing signs of strong growth as aging boomers cross the 62-year-old threshold and become eligible in growing numbers.
An understanding of loan termination behavior and expected resulting cash flow is vital to supporting a robust secondary market for reverse mortgages, which is now being facilitated by Ginnie Mae's new Home Equity Conversion Mortgage (HECM) mortgage-backed securities (MBS)--known as HMBS.
20 submitted a letter to the Federal Housing Administration in response to its requirement of a second appraisal for some home equity conversion mortgages, or reverse mortgages, asking the FHA to reevaluate eligibility requirements for placement on the FHA Appraiser Roster.

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