A common question that comes up, is the reverse loan offered by the government? And the answer is yes for a certain type, while there are some other programs that are available for larger loan amounts and they are called proprietary reverse mortgages.
The most popular program is the one offered by FHA/HUD, federal agencies and it’s called the “Home Equity Conversion Mortgage, otherwise know as “HECM”. A reverse loan is highly regulated by federal and state laws and are considered to be the safest loan in the lending industry.
In 1989 HUD selected 50 lenders that would offer the first FHA reverse loans. Previously they were being done but were a terrible option for a senior. Typically there was equity sharing with the lender and sometimes the borrower was required to purchase an annuity. Due to these earlier loans and how awful they were, the reputation of the loan became tainted and it’s been a bit difficult to overcome the old persona.
But once the federal government stepped in and developed regulations to protect the senior, they have become an excellent option for additional funds for living expenses or any other purpose.
Their popularity has increased substantially in the last three years as seniors have recognized the benefits from having the loan and the peace of mind knowing they money at hand in the event of an emergency or for monthly expenses and especially for prescription and medical costs.
Counseling by a HUD approved agency is required of all applicants and with the additional overview of the federal government, a reverse loan is an excellent and safe option for a senior to have access to their equity and know that their funds are insured, completely safe and protected.