Non-recourse Loan

HECM Non-recourse Loan

There is controversy brewing over the statement that a Home Equity Conversion Mortgage is truly a non-recourse loan. Specifically, it has been reported that many lenders tell borrowers that they “can never owe more than the loan balance or the market value of the home, whichever is less.”  This has always been true… except now HUD has decided to revise the interpretation where the borrower’s heirs might wish to keep the home.  As with most things, you need to rely upon information from an experienced professional reverse mortgage specialist who is up-to-date on how this is presently interpreted by HUD.

Heirs Pay Full Balance

According to a Mortgagee Letter issued by HUD in December, 2008 (ML-08-38) the new arm’s-length rule interprets this feature to mean that if a relative wants to purchase the family home they must pay the full balance owed on the loan – which could be substantially higher than the market value of the property. Many in the mortgage industry are trying to reverse this interpretation but it could take some time. Meanwhile, be forewarned. For more details see Atare’s Report www.thinkreverse.com/?p=91#respond