Reverse Mortgages for Senior Citizens

Protecting You

FHA-HUD reverse mortgage programs were designed in 1988 by the U.S. Department of Housing and Urban Development. They were based on the lobbying efforts of various senior advocates, including the AARP, to provide them access to home equity without fear of losing a home due to missed payments. Reverse loans and the lenders that offer them are heavily regulated by federal and state agencies for seniors’ protection.

Good Faith Estimate and Limit on Fees

Lenders must provide a Good Faith Estimate (GFE) for applications that show each required closing cost. In some cases, all loan costs are paid when the loan is paid off, not upfront like other loans. The U.S. government generally regulates all closing costs on FHA-HECM reverse mortgages and guarantees borrowers against unnecessary or excessive fees.

Independent Counseling Required

Borrowers must obtain independent counseling before closing to help determine if a reverse mortgage is appropriate and ensure that seniors are fully informed of all options. Lenders must provide a list of six agencies that offer counseling over the phone and six that you can visit in person. In general, the counselor will discuss the following:

• All Allowable Closing Costs and Loan Options
• Terms and Financial Implications of a Reverse Mortgage
• Warnings of Using Proceeds for Investments
• Comparison Between Reverse Mortgages and Other Financial Options