Page 2 - WSAAG092_The Evolution of HECM

Home Equity Conversion Mortgage (HECM)

An insured HECM loan means that borrowers would receive The following year, on Oct. 19, Marjorie Mason of Fairway, Kan.,
guaranteed loan payments, according to the terms of their loan, received the first FHA-insured HECM from the James B. Nutter
and that upon repayment of their loan, they would never owe more Company. Since that historic occasion, the FHA has insured more
than what their home was worth. These new insurance protections, than 1 million HECMs as part of a tremendous partnership between
signed into law by President Reagan on Feb. 5, 1988, opened the the government and government-approved private lenders to
door for thousands of elderly homeowners to safely, securely, and provide older Americans with an important and intelligent financial
responsibly convert a portion of home equity into cash. tool to help them secure and enjoy a better retirement.

Many Years of Constant Improvements

Over the years, the HECM loan has been lenders they work with to ensure that the The largest of these safeguards began
improved and strengthened through the HECM is a safe and sustainable loan for rolling out about a decade ago, which
united efforts of many different parties seniors who want to responsibly access was perfect timing considering the first
including HUD, the FHA, the Federal some of their home equity for retirement. wave of baby boomers in 2008 were
Trade Commission, the National Reverse turning 62 — the age when someone
Mortgage Lenders Association (created in New protections continue to ensure can first apply and qualify for a reverse
1997), senior advocacy groups such as the the integrity and mission of the HECM mortgage.
American Association of Retired Persons program to help seniors unlock a portion
(AARP) and the National Council on Aging of their home equity so they have the cash
(NCOA), and the now scores of private they need for a more secure retirement.

The Safe and Steady Taking Action
March of Progress The SAFE Act requires states to implement uniform procedures
2008 when licensing and registering HECM loan originators. The Housing
and Economic Recovery Act establishes more consumer safeguards,
such as a limit on origination fees, rules against cross-selling, and
guidelines for counseling independence.

The HECM for Purchase

The HECM for Purchase is introduced, allowing borrowers to
2009 purchase a new home using a HECM loan. This new option now
provides seniors with the choice of aging in place in their current
home or aging in place in a new home.

The Results
Research conducted by Marttila Strategies for NRMLA reports that
2010 90% of surveyed borrowers felt no pressure to proceed, 90% did
not feel they were misled in any way or given wrong information,
80% said they were likely to recommend the product to a family
member, and more than 50% said they could not meet their
monthly expenses without their HECM.

New Policies
HUD releases new HECM policies creating more consumer and
2013 product safeguards, including placing a limit on the amount of
equity borrowers can access their first year.