March 12, 2011
One of the most attractive features of an FHA reverse mortgage for some applicants is that the loan does not come due until the applicant dies or sells the property. There are no monthly mortgage payments on an FHA Reverse Mortgage, also known as an FHA Home Equity Conversion Mortgage. Instead, the loan is paid off as described above (when the owner dies or sells the home). The borrower–who must be age 62 or older–gets the proceeds from the loan to use as needed.
But there are issues which could make a HECM loan due immediately–what could force the lender to call in the loan immediately? There are several scenarios.
The terms of an FHA reverse mortgage require timely payment of property taxes, hazard insurance, and any other financial obligations as described in the FHA reverse mortgage agreement.
The lender has the right to call in the loan if such obligations are not met. Borrowers should carefully read and make sure they understand important FHA HECM loan details including grace periods, how to handle property tax issues and late payments on such obligations where applicable.
Borrowers should take steps to insure these obligations are paid on time or act quickly to avoid issues that could lead to the loan being declared due. Some lenders-but not all-require escrow accounts to prevent such issues.
Like other FHA home loans there is a primary occupancy requirement which is central to the applicant’s eligibility for FHA HECM loan program. If the property securing the FHA loan stops being the primary residence, your FHA HECM loan can be declared due in full.
Borrowers who own summer homes or RV should know how long they are allowed to be away from the primary residence before the loan is at risk of being declared due. FHA HECM loan paperwork should describe this in detail. Know the exact terms of your FHA HECM loan requirements before you sign.
Every loan contract should be considered unique
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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