Glossary of Terms
A Home Equity Conversion Mortgage is a federally insured reverse mortgage program administered by the FHA, enabling homeowners aged 62 or older to convert a portion of their home equity into loan proceeds without requiring monthly mortgage payments. The loan balance grows over time and is typically repaid when the borrower sells, moves or passes away.
HECM appraisals follow FHA guidelines and require an FHA-roster appraiser to complete a full interior inspection. Because the loan amount is tied directly to appraised value, accurate valuation is especially consequential — overvaluation exposes the FHA insurance fund to greater risk, while undervaluation limits the borrower's available proceeds.
Loan originators and valuation companies working in the HECM space should be well-versed in FHA property eligibility requirements, as condition issues that might pass conventional review can disqualify a property or reduce available equity.