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Reverse Mortgage Glossary

Non-recourse

A HECM reverse mortgage is a non-recourse mortgage, which means that the only asset that can be claimed for purposes of repaying the loan is the home. If there’s not enough value in the home to settle the entire loan balance, the borrower is not on the hook to settle the shortage out of any other assets. Any shortage is settled out of the FHA mortgage insurance fund, which is financed by IMIP and ongoing mortgage insurance premiums.

Because the HECM reverse mortgage is non-recourse, it’s designed to both give access to equity and preserve equity at the same time. It’s not a healthy loan program if it uses equity quickly because that would increase the risk that the loan balance could grow larger than the value of the home – which in turn increases the risk of draining the FHA mortgage insurance fund.