| After the launch of the HECM reverse mortgage loan | | | | reverse loan will use the equity of the home during the |
| in 1989, these fears are not true. When the subprime | | | | whole running time. This means, that the borrower will |
| loans were taken by the low income people, who | | | | stay as an owner in every case. |
| have to pay them back every month, the reverse | | | | 3. The Subprime Guarantee Can Decrease Below |
| loans are always taken against the equity of the home | | | | The Needed Level, But The Reverse Loan Cannot |
| and they do not include any monthly payments. | | | | If a borrower has taken the new loan and the sum is |
| 1. The Subprime Loan Requires Back Payment, But | | | | close to 100 percentage to the market value of the |
| The Reverse Mortgage Does Not. | | | | home and the market starts to decline, the guarantee |
| This is another big difference between these two loan | | | | value does not cover the needed level anymore, the |
| types. The borrower of the subprime loan has to | | | | lender can take the ownership and to sell the home. |
| make the back payments monthly. But with the | | | | The reverse loan sum can never climb to the full value |
| reverse loan a borrower can even increase his | | | | of the home. Another reason is that the loan will be |
| monthly income, because if he has a traditional | | | | paid back, when the loan will be closed. This happens, |
| mortgage loan left, he has to pay it away first. | | | | when the last borrower will move away, will die or sell |
| So the difference is in the cash flow. The reverse loan | | | | the home. |
| borrower will pay everything back, when the loan will | | | | 4. The Mortgage Insurance. |
| be closed, but the subprime borrower every month. If | | | | When a borrower will take the HECM reverse |
| he cannot do the back payments, the lender can sell | | | | mortgage loan, he has to take a compulsory mortgage |
| the home and to use the money to take his part. This | | | | insurance. This is the law. If the selling price of the |
| will never happen with the reverse loan. | | | | home will not cover all the costs of the loan, the |
| 2. The Subprime Borrower Can, But The Reverse | | | | missing part will be paid from the insurance. This |
| Loan Borrower Cannot Lose The Home. | | | | means that a borrower can never lose more than the |
| The subprime borrower can lose the home, if he is | | | | value of the home, nor his other assets will never be |
| unable to do the payments to the lender. So he must | | | | used to pay the mortgage loan. |
| have cash money every month for this. But the | | | | |