October 27, 2015
FHA HECM loans–home equity conversion mortgages, sometimes known as “reverse mortgages”–come with a requirement for all borrowers to be obligated on the FHA HECM to go through HECM loan counseling.
This is not a requirement for other types of FHA mortgages, which leads some to wonder why FHA HECMs have this feature. Why do the borrowers have to complete FHA required counseling sessions as a condition of the loan?
There are many reasons. Since HECM loans feature no monthly payments, cash back to the borrower, and specific requirements for that cash back, counseling is necessary for the applicants to know exactly what they can and cannot get with their HECM loans.
This FHA loan program has changed a great deal in the last two years, and the terms and conditions vary depending on whether the borrower has opted for a fixed interest rate HECM loan or an adjustable rate HECM.
But there’s another extremely important aspect of the required counseling–the borrower’s responsibilities under the loan to prevent it from becoming due and payable because of violations of those terms.
HECM borrowers have an occupancy requirement, for example. Violating the occupancy rules could bring the loan due in full. Failure to use the home as the primary residence may be considered such a violation, and borrowers are expected to know the specific terms of occupancy for their HECM loan.
Failure to stay current on property taxes is another way a HECM loan could be declared due in full–borrowers must stay current on all such financial obligations in order to remain in good standing with their HECM loans.
These are just some of the examples of the things a HECM loan applicant will learn through the required counseling, but definitely not all of what will be explained. Speak to a loan officer to learn more about this mandatory counseling and how FHA HECM loans are unique compared to other loan products.
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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