Government Guarantee
Government Guarantee
FHA reverse mortgages or Home Equity Conversion Mortgages (HECM) come with a number of guarantees and protections that are part of the FHA (Federal Housing Administration) insurance. The FHA insurance provides the following protection and peace of mind to the borrower and their children:
- - The borrowers will never owe more than the home’s fair market value
- - If the loan balance ever grows higher than the loan balance, FHA pays the lender the difference when the last borrower dies or leaves the home.
- - Payments taken from the bank holding the reverse mortgage are guaranteed. If the bank ever goes into default, the payments are guaranteed to be made by FHA.
- - If the loan balance grows higher than the home’s value, the lender cannot take title. FHA insures that you can live in your home as long as the basic loan obligations are met (insurance and property taxes, etc.).
Why does the Government Support this program?
The government is aware that Social Security is not getting seniors where they need to be. In 2009, Social Security recipients will see a 5.8% increase in their benefit checks. Although this increase is better than the 2.3% increase seen in 2008, the government understands that, to many seniors, it’s still not sufficient when they consider the rapidly rising costs of the most basic necessities such as food, power and water.
Medicare has done wonderful things. It has kept a substantial number of people healthy and out of poverty. However, even with the support of Medicare, the elderly spend much more on health care costs than younger Americans, but have much lower income to do so.
The government also knows that it is important for individuals to purchase private health coverage for the part that they don’t pick up. The need for long term care is becoming essential.
Providing a way for seniors to secure the funds necessary to afford private health coverage as well as daily living expenses reduces a large portion of the burden being placed on the government.
