What Is HECM Reverse Mortgage Counseling From Cambridge Credit Counseling?

Why HECM Counseling Is Required#

Before a senior can move forward with a Home Equity Conversion Mortgage (HECM), federal rules call for a counseling session with an approved agency. Cambridge Credit Counseling is approved by the U.S. Department of Housing and Urban Development and the Massachusetts Executive Office of Elder Affairs to provide this reverse mortgage counseling.

What Cambridge Credit Counseling’s Counselors Cover#

Cambridge Credit Counseling’s HUD-approved reverse mortgage counselors provide unbiased education to seniors who are interested in a reverse mortgage. These counselors hold the HUD-Approved Reverse Mortgage Counselor certification, which means they are trained to walk you through how a reverse mortgage works before you make a decision.

Cambridge Credit Counseling’s HUD and Massachusetts Approval#

Cambridge Credit Counseling Corp is approved by the U.S. Department of Housing and Urban Development and by the Massachusetts Executive Office of Elder Affairs to act as a reverse mortgage counseling agency. This dual approval is part of what allows Cambridge Credit Counseling to offer this required counseling session.

Where This Counseling Is Available#

Cambridge Credit Counseling provides reverse mortgage counseling nationwide, except in Minnesota, where it is not offered. If you live in Minnesota you will need to find a counselor located in Minnesota to complete your counseling.

What a Reverse Mortgage Is#

A reverse mortgage is a specialized loan that is available to homeowners that are 62 years or older. It allows them to convert part of the equity in their homes into cash. The loan is called a reverse mortgage because the lender makes payments to the borrower, instead of the borrower making monthly payments to a lender as with a traditional mortgage.

The borrower is not required to pay back the loan until the home is sold or otherwise vacated. As long as the borrower lives in the home, he or she is not required to make any monthly payments towards the loan balance. The borrower must remain current on property taxes, homeowners insurance, and homeowners association dues (if applicable).

Who Qualifies for a Reverse Mortgage#

• You must own a home, be at least 62, and have enough equity in your home.
• Eligible property types include single-family homes, 2-4 unit properties, manufactured homes (built after June 1976), condominiums, and townhouses.
• Lenders must conduct a financial assessment of every reverse mortgage borrower to ensure he or she has the financial capacity to continue paying mandatory obligations, such as property taxes and homeowner’s insurance, as stipulated in the Loan Agreement.
• If a lender determines that a borrower may not be able to keep up with property taxes and homeowner’s insurance payments, the lender will be authorized to set aside a certain amount of funds from the loan to pay future charges.

Types of Reverse Mortgages#

Home Equity Conversion Mortgage (HECM)

HECM (pronounced hek-uhm) is the commonly used acronym for a Home Equity Conversion Mortgage, a reverse mortgage created by and regulated by the U.S. Department of Housing and Urban Development. A HECM is not a government loan. It is a loan issued by a mortgage lender, but insured by the Federal Housing Administration, which is part of HUD. HECMs come with rules and regulations that include a requirement that the borrower receive third-party counseling.

Proprietary Reverse Mortgage

Proprietary reverse mortgages are privately insured by the mortgage companies that offer them. They are not subject to all the same regulations as HECMs, but most companies that offer them emulate the same consumer protections found in the HECM program, including mandatory counseling, as a standard best practice. They are sometimes called “jumbo” reverse mortgages, because they are taken out on higher-valued homes. If you own a home worth significantly more than the HECM maximum loan limit, you may be able to get more funds from a proprietary reverse mortgage.

Single-Purpose Reverse Mortgage

Single-purpose reverse mortgages allow homeowners to borrow against their home equity to fund a single, lender-approved purpose, such as paying property taxes or performing maintenance on the home. Typically, this is the least expensive type of reverse mortgage, but you can only use your proceeds for one thing. HECMs and proprietary reverse mortgages both allow you to use your proceeds however you like, whether to supplement retirement income to cover daily living expenses, repair or modify your home, pay for health care, pay off existing debts, cover property taxes, or prevent foreclosure.

The Pros and Cons of a Reverse Mortgage#

The money from a reverse mortgage can be received as a lump sum, regular monthly advance, credit line account, or any combination of these options. Before taking one out, look at the pros and cons to make sure you know exactly what you’re getting into.

Pros

• A reverse mortgage income will not affect Social Security or Medicare benefits (in most cases).
• If the length of the borrower’s life exceeds the length of the loan, the borrower will only ever be responsible for paying back the amount the home is worth.
• Most reverse mortgages do not require a minimum income.
• The title to the home remains in the possession of the borrower until they sell the home.
• HECM programs allow the borrower to live in a nursing home or other type of home for 12 months before the reverse mortgage loan becomes due.
• Upon the sale of the home, and the payment of loan and fees to the lender, any remaining equity belongs to the borrower or their heirs.

Cons

• A reverse mortgage could potentially have an effect on eligibility for Medicaid.
• Closing costs and origination fees can run high.
• Servicing fees may be charged to the borrower during the life of the reverse mortgage.
• The debt the borrower owes increases over time due to interest being charged to the outstanding balance of the loan.
• Little assets may be left to leave to heirs if equity is used up.
• The interest on the loan is not tax-deductible until the loan is paid off.
• While receiving the payments, borrowers are responsible for continuing to pay taxes, homeowners insurance, maintenance costs, etc. If they do not do so, the loan may become due early.

Other Ways Cambridge Credit Counseling Can Help#

Cambridge Credit Counseling is a 501(c)(3) nonprofit agency that also offers credit counseling, housing counseling, student loan counseling, and bankruptcy counseling, in addition to reverse mortgage counseling. Credit counseling from Cambridge Credit Counseling is a free service for consumers who are having trouble paying credit card and other unsecured bills.

What to Do Next#

If you are ready to complete the required counseling for a HECM, Cambridge Credit Counseling’s HUD-approved reverse mortgage counselors can schedule an appointment with you. You can reach them by calling (800) 757-1788, or call one of Cambridge Credit Counseling’s reverse mortgage counselors directly at (888) 764-7460.