Is A Reverse Mortgage Safe
A HECM comes with protections written into FHA’s rules. It also comes with obligations, and the loan can become due and payable if they are not met. Here are both sides.
Quick answer
Yes. The HECMs Saxton Mortgage offers are FHA-insured, and they are non-recourse: you or your estate will never owe more than the loan balance or the home’s value, whichever is less. You must complete counseling with a HUD-approved HECM counselor before the application is processed. Someone holding your power of attorney or guardianship cannot use that authority to transfer your home to themselves.
Protections built into the rules
These are rules the lender and servicer must follow. They protect you. They do not remove your own obligations under the loan.
- FHA insures the HECM under section 255 of the National Housing Act.
- It is a non-recourse loan. You or your estate will never owe more than the loan balance or the value of the home, whichever is less, and no assets other than the home must be used to repay the debt.
- Before your application is processed, you receive counseling from a counselor on HUD’s HECM Roster. The lender may not steer you to a counselor or pay one.
- The lender may not charge you any fees, or collect your bank account or credit card information, before it receives your signed and dated counseling certificate.
- The lender may not ask you to sign blank or incomplete documents, or any agreement that limits your ability to exercise your legal rights.
- Our program does not allow a person acting under a power of attorney or guardianship to transfer your home to themselves.
FHA insures the loan
Non-recourse caps what is owed
Counseling comes first
No fees before counseling
No blank documents to sign
Agents cannot take the home
What Can Still Go Wrong
The protections above do not stop a HECM from becoming due and payable. Knowing the triggers is part of the honest answer.
The loan becomes due automatically if a borrower dies and the home is no longer the principal residence of a surviving borrower with no deferral period, or if a borrower conveys all title and no other borrower keeps title. With HUD’s approval, it can also become due and payable if a borrower is away for more than 12 consecutive months because of physical or mental illness and no other borrower lives there, or if a borrower does not meet an obligation under the HECM.
Those obligations include paying property charges: property taxes, hazard and flood insurance premiums, ground rents, condo, PUD and HOA fees, and special assessments. You must keep insurance on the home, certify in writing each year that you live there, and tell the lender about absences of more than two months.
Non-recourse limits what you or your estate can owe. It does not mean the home cannot be lost. For how the loan can come due and what you can do about it, see our reverse mortgage and losing your home page.
More protections along the way
This page is for homeowners 62 and older and the adult children who help them weigh a HECM. The parent decides.
Notice On Missed Charges
If property taxes or insurance go unpaid, the servicer must send a delinquency letter warning that the loan will become due if the charges are not paid within 30 days of the notice. The letter must offer housing counseling and list loss mitigation options.
Time To Start Repairs
If the home’s condition deteriorates, the servicer must notify you and give you 60 days to begin the repairs. If repairs do not start, or do not make satisfactory progress, the servicer must follow the due and payable rules.
Servicer Deadlines On Draws
A scheduled payment made after the first business day of the month, or a line of credit draw paid more than five business days after your request, earns you a late charge and interest. The servicer pays it from its own funds and may not add it to your balance.
HUD Backstop On Payments
If you or the lender tells HUD a payment to you was not received, and HUD finds the lender cannot or will not make it, HUD will make the payment.
Anti-Churning On Refinances
On a HECM to HECM refinance, the lender must give you form HUD-92901 within three days of application, showing its best estimate of the total cost and the change in your principal limit. Our program also requires the increase in principal limit to be at least five times the total closing costs.
No Estate Planner Needed
The lender must ask whether loan money will pay for estate planners and tell you those services are unnecessary to get a HECM and cannot be paid from HECM proceeds.
Hear From Homeowners Like You
Frequently Asked Questions
Questions homeowners and their families ask about HECM safety.
Yes. The HECMs Saxton Mortgage offers are FHA-insured, and they are non-recourse: you or your estate will never owe more than the loan balance or the home’s value, whichever is less. You must complete counseling with a HUD-approved HECM counselor before the application is processed. Someone holding your power of attorney or guardianship cannot use that authority to transfer your home to themselves.
No. FHA insures the HECM under section 255 of the National Housing Act. That insurance does not take away your obligations under the loan. The loan can still become due and payable if an obligation is not met.
A HECM is a non-recourse loan. You or your estate will never owe more than the loan balance or the value of the home, whichever is less, and no assets other than the home must be used to repay the debt. That limits what is owed. It does not keep the home in the family.
No. Sellers, real estate agents, builders, developers, lenders, and other parties with an interest in the transaction may not be present during HECM counseling, and may not give you advance copies of the counselor’s review questions with answers. The lender also may not steer you to one counseling agency, pay the counselor, or ask what topics your session covered.
For a HECM with an FHA case number assigned on or after August 4, 2014, an eligible non-borrowing spouse may have the due and payable status deferred after the last borrower dies. The spouse must have been married to the borrower at closing and stayed married for the borrower’s lifetime, been named as a non-borrowing spouse in the loan documents, and lived in the home and kept living there. Every condition must keep being met. During the deferral period, no further money can be drawn from the loan. A spouse who does not meet all the conditions does not get a deferral period.
Our program does not allow a person acting under a power of attorney or guardianship to transfer the home to themselves, because it is a conflict of interest. FHA’s rules also bar the lender, the loan originator, the title company and closing agent, and real estate agents, along with their affiliates, from signing the note or mortgage as your attorney-in-fact. The exceptions are a family member, a case where state law requires it, or a narrow exception that requires a recorded online session where you confirm your identity and reaffirm the terms.
Under FHA’s rules, loan money may not be paid out until the three-day rescission period under federal law ends, if that period applies to your loan. No interest may be charged on funds held for you during it. Ask us whether it applies to your loan.
The lender must give you a written HECM Program Description in clear, consistent, and concise language, and must not mislead you about the HECM’s features or limitations. It must give you an estimate of closing costs that explains which charges are required to get the HECM and which are not. Closing costs must be customary and reasonable. If you later ask to change your payment plan, which is possible unless you chose a lump sum at closing, the servicer must send the terms within five business days and complete the change within five business days of getting your signed plan.
Find out what you qualify for
Tell us about your home, who lives there, and what you want the money to do, and we will walk you through the protections and the obligations that come with a HECM.
Get Pre-Qualified- U.S. Department of Housing and Urban Development, FHA and housing resources
- U.S. Department of Housing and Urban Development, FHA mortgage insurance premiums
Loan amounts, rates, terms, and eligibility are subject to credit approval, asset and income verification, appraisal, and program guidelines. Program availability varies by state. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.