July 26, 2011
In troubled economic times, FHA borrowers can get into trouble on their mortgages because of reduced income, higher prices and other issues.
FHA and conventional borrowers know that missing one payment isn’t necessarily the road to foreclosure, but such problems should be addressed quickly to avoid going into loan default and/or foreclosure proceedings.
Those with Home Equity Conversion Mortgages wouldn’t seem to be affected in the same way, since a HECM loan is designed to give the borrower access to funds supplied using the equity in the property as the security for the loan. There are no monthly payments and the loan is satisfied once the borrower dies or sells the home–once the home is sold, the loan is paid off in full,
So how is it possible that an FHA HECM borrower could become delinquent on a loan he or she is not required to make monthly mortgage payments on?
The short answer is that it IS possible, if a home owner with a HECM does not meet the obligations spelled out in FHA requirements with regard to taxes and insurance. “The borrower shall maintain hazard insurance on the property in an amount acceptable to the Secretary and the mortgagee…the borrower must pay taxes, hazard insurance premiums, ground rents and assessments in a timely manner, except to the extent such property charges are paid by the mortgagee in accordance with FHA guidelines.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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