FHA Insurance Covers HECM Borrowers Who Are Underwater

NewImage.jpgWhen the media covers reverse mortgages it’s almost always about one thing, fees.

Sure, fees and costs are an important subject, but the San Francisco Chronicle is reporting on how reverse mortgages are holding up in this economy even though many homeowners may find themselves under water on the loans.

One San Francisco resident’s mother took out a reverse mortgage on her home in Florida about four years ago.  At the time the home was appraised at $260,000 which enabled her mother to receive $160,000 from the HECM.

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Because the woman’s home was paid off, she decided to receive $500 per month and leave the rest in a credit line.  Today, her loan balance is about $75,000, and she has about $105,000 remaining in her line of credit.  But the value of her home has fallen to roughly $80,000.

Since the FHA insures the loan, “No matter what happens to the home’s value, she will always be able to take out whatever remains on her equity line. “The lender must honor the mortgage contract as originally written,” says FHA spokesman Lemar Wooley.

Read the rest at the link below.

Reverse mortgage safe from plunging home value

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  • While there are some errors in the article, overall I do not remember reading a better article. It is as good, if not better, than industry ads. Not only does Ms. Pender get it right, she finds room to emphasize the positive aspects of HECMs using a real life example.

    Being a critic requires being negative most of the time. Here is one time, where pointing out that the article has errors is not negative. It shows the article was not written by an industry insider.

    NRMLA needs a reporter of the year award for reporting on reverse mortgages honestly and correctly. It should not be based on being positive or negative. It should be based on pointing out how the product impacts the lives of seniors.

    If the facts presented in the story are verified, my nominee is Ms. Pender. She should be invited to the convention as a guest speaker.

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