Chapter 1
Federal Mortgage Laws and Consumer Protection Regulations
Course: Safe Mlo Prep
Subject: Safe Mlo Prep
Chapter: General Mortgage Knowledge
OVERVIEW
Beyond standard purchase and refinance loans, a range of specialty products addresses unique borrower financial situations, property types, and investment goals. These products are tested on the NMLS exam — know what each one is, who it serves, and its key features.
- Reverse Mortgage (HECM)
A Home Equity Conversion Mortgage (HECM) is a government-insured reverse mortgage administered by FHA under HUD.
Key HECM facts:
- Available to homeowners age 62 or older
- No monthly mortgage payment required — interest accrues and is added to the loan balance
- Borrower must continue to pay property taxes, homeowner's insurance, and maintain the property
- Loan becomes due and payable when: the borrower sells the property, moves out as their primary residence, or passes away
- The borrower — or their estate — never owes more than the home's value at the time of repayment (non-recourse feature)
- Borrowers must complete HUD-approved counselling before applying
- Loan proceeds may be received as a lump sum, monthly payments, line of credit, or combination