What is the difference between a HECM Mortgage and a Reverse Mortgage? Truth be told, there is no difference. In other words, they are the same. HECM is a simple rebranding of an old product.
The Reverse Mortgage was signed into law by President Regan in the late 80s. During the 90s and early 2000s, all the way up to around 2015 the Reverse Mortgage was going through some pretty rough growing pains. The Loan had some key flaws. Additionally, it was being sold by all the wrong banks and loan officers that just didn’t have the homeowner’s interests at heart. The result was a mass of bad experiences and negative stigmas that will hang around for a few more years.
HECM or Home Equity Conversion Mortgage is FHA’s attempt at rebranding. As the product underwent improvements and changes FHA wanted to give it a new face. Thus, they went with HECM to try to disassociate from the negativity of the old guidelines.
The New Reverse Mortgage:
Fortunately, the New Reverse Mortgage is designed with the homeowner at its core. The new terms and guidelines are meant to give the homeowner greater financial freedom today while still protecting their home’s equity. These changes give the homeowner more security now and more flexibility in the future if life changes. It also makes great steps forward to help protect the equity the heirs will inherit.
Embrace the past:
I am usually the first to say the old Reverse Mortgage was a Train Wreck. But we don’t need to hide from it. We just need to learn from it and recognize that the fantastic structure of the Reverse Mortgage today wouldn’t exist if it hadn’t been for the painful lessons learned over the years.
If you or someone you love needs more information on a Reverse Mortgage give us a call.