The home equity conversion mortgage (HECM) is the most popular reverse mortgage. The guidelines allowing lenders to make this loan are offered by the Department of Housing and Urban Development. (It is FHA-insured.) It requires the borrowers to:
• be 62 years of age or older;
• own the property;
• occupy the property as the primary residence; and, • participate in a consumer information session given by an approved HECM counselor.
These requirements need little explanation. Although the test for a primary residence is somewhat subjective, the general rule is that it is the property you live in most of the time and consider your home. It is not your vacation home or a piece of investment property that you rent out to someone else.
Although the theory for all reverse mortgages is basically the same, there are enormous differences in the types of reverse mortgages and from whom you borrow.
The main reason counseling is required is the notion, right or wrong, that seniors require more protection than other adults. An 18-yearold can get a loan without special counseling, but a 62-year-old has to be counseled. Having said that, counseling is a benefit that should be available to (even required for) an 18-year-old. The other reason seniors get counseling is that there is an organization that watches out for them. There is no such organization for the 18-year-old. The American Association of Retired Persons (AARP), in cooperation with HUD, has a list of approved counselors. The counselor will explain to the borrower the different types of reverse mortgages, and which, if any, will help the borrower best achieve his or her objectives.