By: Fabiola Grosshan
Submitted: 2010-06-03 04:26:43 | Word Count: 361
Building a program to help provide funds for seniors, the FHA reverse mortgage program has fast become the standard for reverse mortgages. The most common type of reverse mortgage today is the FHA Home Equity Conversion Mortgage, or HECM. Because the HECM is federally insured, the borrower and lender receive special protections, unlike other loans.
Some prospective reverse mortgage applicants wonder if the downturn in the economy, specifically in the housing market, will affect a senior’s chance of qualifying for a reverse mortgage. Because the mortgage is federally backed, borrowers can rest assured that a current reverse mortgage, even if the value of the home declines, will still be covered by the Federal Housing Authority. Likewise, the lender is insured against decreases in the home value amount. A New Hampshire reverse mortgage lender can offer historically low rates based on these HECM guarantees.
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Massachusetts reverse mortgage interest rates are incredibly low right now because lenders are backed by the FHA reverse mortgage program. If the house loses value or the senior-occupied home cannot cover the cost of the reverse mortgage loan, then the insurance part of the FHA HECM will come into effect and pay the difference.
Seniors should be very cautious when evaluating a New Hampshire or Massachusetts reverse mortgage where lenders are pushy and cannot show proper proof that they are certified by the FHA as a reverse mortgage lender. In the past, lenders offered proprietary reverse mortgages where the bank took on the risk if the home lost value. In these circumstances, the bank charges much higher interest fees in order to protect itself, but the bank cannot request the change in value from the borrower; the bank must pay the difference itself.
For seniors seeking a reverse mortgage, the FHA reverse mortgage program is the best choice in the current market until home values stabilize, but this doesn’t mean that reverse mortgages aren’t good vehicles to help fund immediate needs.
