Thinking about a reverse mortgage in New York, or scheduling one as a lender? A HECM closing looks a lot like a regular mortgage closing, with a few extra safeguards built in to protect older homeowners. Here is what the process actually involves.
What is a HECM, in plain terms?
A Home Equity Conversion Mortgage (HECM) is a reverse mortgage insured by the Federal Housing Administration, and it is the most common type of reverse mortgage. It lets a homeowner age 62 or older turn part of their home equity into cash, a line of credit, monthly payments, or a mix of the three. You keep the title to your home. The loan is repaid later, usually when the last borrower sells, moves out for more than a year, or passes away. The federal Consumer Financial Protection Bureau publishes a plain-language guide to how these loans work.
Who qualifies for a HECM in New York?
To qualify, you generally need to:
- be 62 or older, and every borrower on the title must meet the age rule
- live in the home as your primary residence
- own the home outright, or have enough equity to pay off any existing mortgage at closing
- keep up with property taxes, homeowners insurance, and any HOA dues
- complete a counseling session with a HUD-approved counselor
The HECM closing process, step by step
New York treats reverse mortgages carefully, and for good reason. The borrowers are often retired and living on a fixed income. Here is the order things usually happen.
Step 1: Counseling first
You meet with a HUD-approved counselor who explains the loan, the costs, and the alternatives. This step is not optional, and you receive a certificate that proves it happened. It is your chance to ask hard questions before any paperwork is signed.
Step 2: Written disclosures
The lender has to spell out the interest rate, fees, payment options, and the events that could cause the loan to come due. New York’s Department of Financial Services oversees reverse mortgage lending in the state and requires several of these disclosures on top of the federal ones.
Step 3: Title search and appraisal
A title search confirms who owns the property and whether any liens need to be cleared, and an FHA appraisal sets the home’s value. If a title problem turns up, it has to be resolved before the loan can close. This is the same title work that protects any buyer, so problems get caught and cleared before they can threaten the loan.
Step 4: The closing table
At closing, you sign the loan documents, the note, and the mortgage. If you still owe money on the house, those funds pay off the old loan first. Whatever is left becomes available to you in the payout method you chose.
Step 5: Your right to cancel
Federal law gives you three business days after closing to cancel a HECM on your primary home, a protection called the right of rescission. New York’s reverse mortgage rules add further cancellation and disclosure protections, so ask your attorney which ones apply to your loan.
A reverse mortgage is one of the few loans where the paperwork is meant to slow you down on purpose. The counseling, the disclosures, and the cancellation window all exist so you can change your mind.
What keeps a HECM in good standing?
A HECM does not require monthly mortgage payments, but it is not free of obligations. To keep the loan from coming due early, you have to:
- pay property taxes and homeowners insurance on time
- keep the home in reasonable repair
- keep living there as your main residence
Falling behind on taxes or insurance is one of the most common reasons a reverse mortgage goes into default, which can lead to foreclosure. Plan for those costs before you borrow.
Non-borrowing spouses: an important exception
If one spouse is under 62, they may be able to stay in the home after the borrowing spouse dies, but only if the loan was set up correctly and specific conditions are met. This is worth reviewing closely before you sign, because the rules are strict and mistakes are hard to undo.
Frequently Asked Questions
Do I lose ownership of my home with a HECM?
No. You keep the title. The lender holds a lien, like any mortgage, but you remain the owner. The loan is repaid when the last borrower sells, moves out for more than a year, or passes away.
Is counseling really required?
Yes. Federal rules require a session with a HUD-approved counselor before a HECM can move forward, and you receive a certificate showing it was completed.
Can I change my mind after signing?
Often, yes. Federal law gives you three business days after closing to cancel a HECM on your primary home. New York adds its own cancellation protections, so ask your attorney which ones apply to your loan.
What happens if I fall behind on property taxes?
Missing property taxes or homeowners insurance can put the loan into default and, in some cases, lead to foreclosure. Budgeting for these costs is part of taking out a reverse mortgage responsibly.
Can my spouse stay in the home if they are under 62?
Possibly, if the loan was set up correctly and specific conditions for a non-borrowing spouse are met. The rules are strict, so review them with an attorney before signing.
Talk to a New York real estate attorney first
A HECM is a long-term decision that affects your home and your estate. A real estate attorney can review the terms, check the title, and make sure the closing is handled correctly. Learn more about how we handle HECM and reverse mortgage closings, or call our office to talk through your situation.
This article is general information, not legal advice. Reverse mortgage rules change, and every situation is different. Speak with a qualified New York attorney before signing any loan documents.