General Mortgage Knowledge · 20% of the SAFE exameasy
Correct answer: The borrower or estate will never owe more than the home's fair market value at repayment, even if the loan balance exceeds the home's value
Non-recourse protection is the key consumer safeguard in a HECM: if the loan balance grows to exceed the home's value (common with reverse mortgages over time), the borrower or heirs owe ONLY the lesser of the loan balance or the home's current value. The shortfall is covered by FHA's Mutual Mortgage Insurance (MMI) fund. Heirs can walk away from the home without personal liability for the excess debt. This protection is why HECMs require FHA insurance premiums.
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