Reverse Mortgages Types

/Reverse Mortgages Types
  • Proprietary Reverse Mortgage: There are currently only two companies that are offering the Proprietary Reverse Mortgage and these are Finance America Reverse Mortgage located in Tulsa, OK and the American Advisers Group of Orange, CA. Proprietary reverse mortgages are different from HECMs in that there are variances in the regulations, but they are similar in the protection clauses benefiting the borrowers. They ae privately insured by the participating companies. Proprietary types are generally preferred when the borrower has a home with a higher value. It offers the possibility of higher loan amounts with the cap being $625,000. Mandatory counseling is a requirement that all borrowers must satisfy prior to eligibility.
  • Home Equity Conversion Mortgage or HECM: The United Stated Department of Housing and Urban Development regulates this type of reverse mortgage. This loan is not administered by the government, but it is insured by the Federal Housing Administration, a component of HUD. It is issued by a mortgage lender. This is the most common type of reverse mortgage issued and it also requires mandatory loan counseling for the borrower(s). HECM loans charge an insurance fee of 1.25% annually on the total balance of the loan. In the event that the lender cannot make the payment, the insurance guarantees that the borrower will be paid. If the home value is not adequate to pay off the loan balance, the government is responsible for paying off the balance so both borrower and lender are protected by the insurance.