What Is a Home Equity Conversion Security Deed?
A home equity conversion security deed is the document that records the Home Equity Conversion Mortgage (HECM) on a borrower's property. An HECM, or reverse mortgage, is a loan designed for seniors ages 62 or older to access to the equity in the home (as cash) while still residing in the property.
Other People Are Reading
-
The Deed
-
The home equity conversion security deed is signed at closing, confirming the existence of a mortgage--in this case, a reverse mortgage--on a borrower's property. This document is notarized by the closing agent (usually an attorney) and sent to an abstractor who records the deed at the country Registry of Deeds, thus securing the loan.
HECMs and History
-
Reverse mortgages, the more commonly used term, were first introduced as a way to help seniors on fixed incomes (usually Social Security and small pensions) who were cash-poor and house-rich. The loans, as the name suggests, pays the borrower instead of the lender each month. The loan comes due when the borrower dies or sells the property.
-
Types
-
The Federal Housing Administration provides a few different plans for seniors and FHA-approved lenders. Generally, the borrower agrees to secure her property with a lender's home equity conversion security deed, then receives a monthly stipend based on the loan amount agreed to by both parties. See Resources below for more information on varieties of reverse mortgages.
Benefits
-
The main benefit of the HECM mortgage is that it allows for a quality of life improvement for many seniors. Before HECMs, seniors were forced to make the decision to sell their homes to access the cash. Reverse mortgages allow seniors to live in their homes while collecting on the equity they earned while paying down their mortgages.
Warning
-
Some unethical lenders prey on vulnerable and cash-strapped seniors. In the worst cases, the lender gains full control of the property and maintains the right to sell the property at will. Beware of any reverse mortgage lender who aggressively pursues you or attempts to coerce you into signing a loan.
-
