Consumer Safeguards for Reverse Mortgage Loans

Reverse mortgage loans are regulated by both state and federal law. The federal government has put several consumer protections in place to ensure that homeowners are well-informed and protected when entering into a reverse mortgage agreement.

Required HUD Counseling

Before you can apply for a Home Equity Conversion Mortgage (HECM), which is the most common type of reverse mortgage, you must meet with an independent HUD-approved housing counselor. This counselor is required to explain all of the costs, terms, and alternatives to a reverse mortgage so you can make an informed decision.

Non-Recourse Protection

All HECM reverse mortgages are non-recourse loans. This means that you can never owe more than the value of your home. If the loan balance exceeds the home value when the loan becomes due, the FHA insurance fund covers the difference — not you or your heirs.

Three-Day Right of Rescission

After signing your loan documents, you have three business days to cancel the loan without penalty. This gives you time to review the final terms and make sure the loan is right for you.

Spousal Protections

HUD rules protect eligible non-borrowing spouses from displacement if the borrowing spouse passes away or moves to a care facility, provided they continue to meet the loan terms.

To learn more about whether a reverse mortgage is right for your situation, contact Freedomstar Financial at 888-659-0033.