What are FHA and Proprietary reverse mortgages and how are they different?
The majority of the reverse mortgage loans made today are government loans, insured by the Federal Housing Authority (FHA). The FHA is a division of the Department of Housing and Urban Development (HUD). The government reverse mortgage is known as a Home Equity Conversion Mortgage (HECM) and the government insurance charged on each loan is 2% of the available principal lending limit for each HECM loan insured by HUD. The insurance you pay guarantees you that no matter what happens to the lender in the future, HUD will always make sure that you receive your payments. If anything ever happened, this branch of the federal government will step in and make sure you receive your payments on a monthly basis (if you chose the payment option), or that your credit line is always available to you. A proprietary mortgage does not have the mortgage insurance premiums and there is no federal insurance to guarantee future payments. However, you only owe what you borrow (plus interest and any financed
