What If Your Reverse Mortgage Lender Goes Out of Business?

8/07/2008

posted by N. Sioris

Stumble It!

In today's uncertain economic atmosphere, it's not unusual to pick up the business section of the newspaper or turn on the evening news to see or hear an announcement of yet another bank or financial institution going out of business or being taken over by either the FDIC or another stronger company.

These are scary times to be sure. However, what if you are a reverse mortgage borrower and depend on the regular monthly payments you receive from the proceeds of your reverse mortgage loan or line of credit? Are you in danger of that income stopping or your line of credit being wiped out entirely by an insolvent lender?

If your reverse mortgage is an FHA insured HECM (Home Equity Conversion Mortgage) the answer is a resounding - NO! You are not in any danger, because your loan has MMI (Mutual Mortgage Insurance.) Your reverse mortgage loan and all of your future loan proceeds/payments are backed by the full faith and credit of the United States government.

Once again, we point out the huge advantage of getting a HECM Reverse Mortgage versus any of the other types of reverse mortgages available today. Yes, we have all heard the tired old refrain about how high the costs are for reverse mortgages. This is a perfect illustration for the justification of the 2% fee charged for the FHA reverse mortgage insurance premium. This insurance premium is one of the largest cost components in the overall itemization of the closing costs for FHA/HECM loans. However, I would venture to say that there is not one reverse mortgage loan borrower today, that does not want this coverage given the current financial climate. Can you say, "sleep well at night?"

If you are interested in a detailed explanation about reverse mortgage costs, you can request your free copy of reverse mortgage costs explained here.