A Reverse Mortgage? What the “HECM” is It? By Charlotte Knott
Prospective borrowers are often in a big hurry. They want to rush through this requirement and HECM is the acronym for just get to the bottom line. How FHA’s Home Equity Conversion much can I get from the loan? Mortgage, more commonly Because this is a complex loan, known as a reverse mortgage. the required counseling includes Much has been written about the financial implications of the reverse mortgages, both pro and loan and repayment conditions. con. The best known advantages The costs incurred and the are that the loan allows people obligations of the borrower are to remain in their homes without specified. The counselor will covhaving to pay a mortgage. It’s a er the financial details, but it is the non-recourse loan which means questions with answers that are that the borrower or their heirs not quantifiable that really need can never owe more than the to be considered. Why does the home is worth. borrower want a reverse mortThe basic requirements are that gage? Do they need the money the borrower: now or do they have a specific • be 62 years of age or older expenditure in mind? Sometimes • live in the home as a people are motivated because primary residence they have received so many ads by • have enough equity in mail, or several calls from lenders the home to pay off any that they feel pressured to get a existing mortgages or HECM that they don’t want or lines of credit need. It’s like hearing that the Recently, lenders have been lottery is now $500 million so you required to consider how well just have to buy a ticket. loan applicants have handled The borrower should consider home payments, credit cards, if now is the best time to get and installment loans, as well as a reverse mortgage. Waiting a ensuring that they have enough funds to continue paying property few years usually increases the amount of money available to a taxes and home insurance. The borrow because the borrower is borrower must complete HECM older and the value of the home counseling successfully. Counseling begins with a phone may have appreciated. When the borrower is on the younger side, call to a HUD approved counthere is a risk of outliving the seling agency with a HUD listed equity in the home. HECM counselor. The intake The balance owed on a reverse includes many questions about the mortgage increases constantly demographics of the borrower or because of accruing interest and borrowers. The counselor must mortgage insurance. Waiting to get specific information about the take a reverse mortgage until it’s value of the property, the balance needed will decrease the amount of any mortgages or liens on the that eventually needs to be repaid. property, the cost of property The prospective borrower also taxes and insurance, and whether needs to consider his/her comfort or not the borrower has any level with this ever increasing debt. outstanding federal debt. These If the borrower needs more facts are used to prepare the income now, are there other loan estimate. The counselor is required to send the applicant this options available? Would selling and moving to a different type estimate and several brochures of housing be a better option? about reverse mortgages. The Would renting a part of the home counseling appointment is schedbe an option? Are there other uled at this time. possibilities to supplement monthThe counseling session can be done face-to-face or by telephone. ly income? Some borrowers are concerned about what will be left The cost can range from free to for their heirs and how a reverse $125 or more. Thorough counmortgage will impact their estate. seling usually requires more than These questions are just as one hour and can easily last two hours. It should never be rushed. important as the financial consid-
erations. When the answers are explored frankly and supportively with a counselor, the HECM borrower is more confident about their decision. This is especially true when the counseling is done face-to-face with someone who will still be available to answer questions after the appointment. The HECM experience is much easier when the applicant has a thorough understanding of how it works. n This article is for informational purposes only and is not a solicitation. Charlotte Knott is a HUD listed HECM Counselor with Housing Counseling Ser vices, Inc. (www.housingetc. org) where HECM counseling is made available free of charge.
THINKING ABOUT A REVERSE MORTGAGE? GOT QUESTIONS? WE’VE GOT ANSWERS!
Housing Counseling Services, Inc., a HUD approved non-profit housing counseling agency is one of the few housing counseling agencies in the DC metro area that also has certified Reverse Mortgage, also known as Home Equity Conversion Mortgage (HECM), counselors on staff. This resource has been valuable for the individuals we counsel and we want to make this resource available to as many people as possible. HCS have two educational options for homeowners and their family members: • The first option is for those who have never had a reverse mortgage and want to learn more about them. On Tuesday, June 14th, 2016 at 2:00 PM we will have a workshop called “Reverse Mortgages for Beginners, How to Apply?” • The second option is for those who have a reverse mortgage but need a refresher on how it works. The “Reverse Mortgage Refresher Workshop” will be held on Tuesday, June 21st, 2016 at 2:00 PM. The workshops will be held at Housing Counseling Services, Inc., 2410 17th Street, NW, Suite 100, Washington, DC. All HCS workshops are available in English and Spanish. Pre-registration is requested at our website, www.housingetc.org. Other languages are available with advance notice. For more information contact us at (202) 667-7006 or firstname.lastname@example.org.
THE WASHINGTON INFORMER HOMEOWNERSHIP SUPPLEMENT – JUNE 2016 / www.washingtoninformer.com