Home Equity Conversion Mortgages
HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
National Housing Act, as amended; Housing and Community Development Act of 1987, Section 417, Public Law 100-242, 12 U.S.C. 1715z-20.
To enable elderly homeowners to convert equity in their homes to monthly streams of income or, except for Texas, lines of credit.
Types of Assistance
Uses and Use Restrictions
HUD insures lenders against loss on reverse mortgage loans. These loans may be used to provide monthly streams of income or, except for Texas, lines of credit for older homeowners, 62 years of age or older.
Eligible borrowers are persons 62 years of age or older and must complete counseling from a HUD-approved agency prior to obtaining the loan. Eligible properties include Single Family one-to-four unit owner-occupied dwelling units, condominiums and Planned Unit Developments, if they meet FHA standards, and manufactured homes, if they meet FHA standards.
Documentation regarding the characteristics of the property and the qualifications of the mortgagor are assembled by the mortgagee. This program is excluded from coverage under OMB Circular No. A-87.
Application and Award Process
This program is excluded from coverage under OMB Circular No. A-102 and E.O. 12372.
The borrower is required to receive counseling from a HUD-approved counseling agency prior to application. Approved Direct Endorsement Lenders process all aspects of the loan application and submit it to HUD for insurance endorsement. This program is excluded from coverage under OMB Circular No. A-110.
See Application Procedure.
Range of Approval/Disapproval Time
Mortgagee will state the reasons for refusing an application. The applicant may reapply subject to concurrence of the lender.
Formula and Matching Requirements
Payments that a borrower can receive from a reverse mortgage are determined by calculating the principle limit. This is determined at closing using a factor corresponding to the age of the youngest borrower, the interest rate, and the lessor of the value of the home or the FHA limits for the area. Mortgage insurance premiums will be collected including: (1) an up-front premium which may be financed and (2) a periodic premium which is paid monthly. The loan origination charge by the mortgagee varies, but the financed portion may not exceed the greater of 2 percent of maximum claim amount or $2,000. Mortgagors may be charged appraisal and inspection fees in accordance with fee schedules established by HUD. These charges may also be financed.
Length and Time Phasing of Assistance
The mortgage has no specified term. The mortgage is due and payable at the death of the borrower(s) or if the borrower sells, conveys, or moves from the property.
Post Assistance Requirements
Defaults in meeting the mortgage terms must be reported. All approved mortgagees at any time upon request by HUD must furnish a copy of their latest financial statement.
The Department of Housing and Urban Development reserves the right to audit the account of the mortgagee to determine its compliance and conformance with HUD regulations and standards.
Mortgagees are required to service and maintain records in accordance with acceptable mortgage practices of prudent lending institutions and the HUD regulations.
(Mortgages insured) FY 07 $5,571,350,940; FY 08 est $4,225,354,720; and FY 09 est not available.
Range and Average of Financial Assistance
Payments that a borrower can receive from a reverse mortgage are determined by calculating the principle limit. This is determined at closing using a factor corresponding to the age of the youngest borrower, the interest rate, and the value of the home or the FHA limits, whichever is less. The average loan amount for FY 2006 is $235,634.
In Fiscal Year 2006, 76,282 loans were Insured; in Fiscal Year 2007, 107,367 loans were insured.
Regulations, Guidelines and Literature
"Options for Elderly Homeowners: A Guide to Reserve Mortgages and Their Alternatives," no charge; 24 CFR 200 and 206, HUD Handbook 4235.1, Rev. 1.
Regional or Local Office
Persons are encouraged to contact the Homeownership Center serving their State(see http://www.hud.gov/offices/hsg/sfh/hoc/hsghocs.cfm or the nearest HUD Office. See Catalog Address Appendix IV for a list of Offices.
451 7th Street, S.W., Washington, DC 20410. Telephone: (202) 708-2121.
Web Site Address
Examples of Funded Projects
Criteria for Selecting Proposals