A significant feature of the HECM is that it is insured under the government’s Federal Housing Administration (FHA) insurance program. This program ensures that you will receive all payments due to you as long as you live in your home. It also ensures that your lender will receive full repayment of your loan balance, even if it is greater than the value of your property. The FHA insurance premiums that you pay as a HECM borrower create a reserve fund to cover any losses that might occur.
The FHA insurance on HECMs also protects borrowers and lenders against the risk that the loan balance might, at some time, exceed the value of the home. This means that as long as you continue to occupy your property as your principal residence, you cannot be forced to sell or vacate your home — even if the loan balance exceeds the value of your home or if the fixed term over which you received your monthly payments has expired. In addition, as a HECM borrower, you or your estate will never owe more than your loan balance or the value of your property — whichever is lower — and no assets other than your home must be used to repay your debt, because the FHA insurance covers any further financial obligation to the lender.
FHA insurance also protects you against the possibility of lender default. Should your lender fail to make payments to you as agreed in the loan, the FHA will continue making loan advances directly to you.