September 1, 2011
FHA Home Equity Conversion Mortgages, also known as HECM loans, are for qualified borrowers 62 or older who want to apply for a loan on their home using the equity in the home to secure the mortgage. This type of loan features cash out to the borrower and is not paid back until the borrower dies or sells the property.
FHA HECM loans are unique because they offer money to the borrower as a monthly installment, a line of credit or other arrangements as permitted by FHA rules. The FHA requires applicants to get HECM-specific loan counseling before they can commit to the mortgage due to the terms and conditions of the mortgage loan.
Some of those terms and conditions require the borrower to meet all loan obligations (including staying current on property taxes and using the home as the primary residence) or the loan may be declared due in full.
Because of these conditions, there is a mandatory HECM loan counseling requirement built into the loan application process. No HECM loan may be approved without the borrower receiving HECM loan counseling by an FHA-approved agency. Recently the FHA clarified those rules to include a requirement for all property owners listed on the deed of the home to be included in the counseling, not just the borrower.
According to FHA mortgagee letter 2011-31, “All owners shown on the property deed (or legal representative, in cases involving documented lack of competency) and a non-borrowing spouse must personally receive counseling. The Certificate must be signed and dated by both the counselor,
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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