What is the FHA/HUD insurance for?
Congress wanted to make sure that reverse mortgage holders could stay in their house and make no payments during their lifetime regardless of what happened to the economy or the company providing the loan. So, even if your home value falls below the loan amount (like some homes which were repossessed during the “Great Depression”) the HUD insurance protects you and your heirs by guaranteeing that neither will have to make up any difference between the loan amount and what the home sells for. So, unlike conventional mortgages, the loan cannot be “called” for any shortfall. Also, if you elect monthly payments for life and something happens to the bank, the insurance guarantees the payments to you.
