HECM Certification
The U.S. Department of Housing and Urban Development (HUD) administers the only government-insured reverse mortgage program. The Home Equity Conversion Mortgage (HECM) is a loan that allows elderly homeowners to convert their home's equity into income or line of credit. HUD requires that borrowers obtain a certificate of counseling before obtaining the loan.
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History
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The HECM program was established in 1987 as a result of the Housing and Community Development Act. By 1990, all Federal Housing Administration-approved lenders could participate in the HECM program by qualifying seniors over 62 years of age and originating (funding) the mortgage.
Function
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Borrowers applying for HECM must obtain a counseling certificate from a HUD-approved housing counseling agency, which certifies that they completed and understand matters discussed in the education session. They discuss financial implications, disclosures, HECM options and other reverse mortgage alternatives, according to the HECM handbook.
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Time Frame
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Borrowers must pass a test to obtain the certificate. Upon completion of the counseling session, they must answer five out of 10 questions correctly, demonstrating sufficient comprehension of the program. The lender must receive the certificate before it can proceed with the HECM loan application.
Identification
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In order to ensure the authenticity of a HECM counseling certificate, the lender must obtain the original certificate with client and counselor signatures before HUD will insure the loan. A faxed copy of the certificate is only acceptable as temporary proof that the borrower completed a session via telephone.
Potential
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HUD says that it is reviewing protocol for how it issues the HECM certificate. According to an article in Reverse Mortgage Daily, HUD will no longer allow counselors to withhold the HECM certificate if the client fails the comprehension test.
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References
Resources
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