California HECM Guide

Who Is Eligible for a HECM in California

Eligibility starts with age. The statute defines an "elderly homeowner" as one "who is, or whose spouse is, at least 62 years of age or such higher age as the Secretary may prescribe" (12 U.S.C. § 1715z-20(b)(1)), and HUD's regulation adds that "the youngest borrower shall be 62 years of age or older at the time of loan closing" (24 C.F.R. § 206.33).

The home must be the principal residence of each borrower at closing (24 C.F.R. § 206.39). The CFPB describes that as the place a person lives the majority of the year. The CFPB lists further requirements, including:

• Enough equity. The home must be owned outright or carry a low balance that can be paid off at closing, with the borrower's own funds or HECM money. The lender and the FHA appraisal decide the figures.
• No federal debt. A borrower cannot owe federal debt, such as federal income taxes or federal student loans, though HECM money may be used to pay it off.

The statute covers a 1- to 4-family home in which the borrower lives in one unit (12 U.S.C. § 1715z-20(d)(3)). HUD's property standards decide which other homes, such as certain condominiums and manufactured homes, may qualify. Lenders also review whether a borrower can keep up taxes, insurance and upkeep, under HUD's standards. A spouse who is not on the loan may be an "Eligible Non-Borrowing Spouse" under 24 C.F.R. part 206; HUD publishes those rules. California does not add a separate state age or equity requirement to the federal rules.

The Required HUD Counseling Session

Before any HECM can be made, the homeowner sits down with someone who is not selling anything. Federal law requires "adequate counseling" by "an independent third party" not associated with or paid by anyone involved in originating or servicing the loan, funding it, or selling annuities, investments, long-term care insurance or other financial products (12 U.S.C. § 1715z-20(d)(2)(B)).

The counselor must discuss, among other things, other housing, social service, health and financial options; other home equity options such as property tax deferral; the loan's financial implications; and that a HECM "may have tax consequences, affect eligibility for assistance under Federal and State programs, and have an impact on the estate and heirs" (12 U.S.C. § 1715z-20(f)). HUD may require more topics. In California, counseling is in person unless the applicant elects another way, as described in the California law section below.

HUD's HECM program page says a counselor can be found through the HECM Counselor Roster or by calling (800) 569-4287. More on what HUD reverse mortgage counseling involves is available on this site.

The one statutory exception to the counseling requirement is a HECM-to-HECM refinance, where the borrower may waive it only if a cost disclosure was received, the increase in the borrower's principal limit exceeds the refinance cost by an amount HUD sets, and no more than 5 years have passed since the original closing (12 U.S.C. § 1715z-20(k)(3)).

How You Can Choose to Receive HECM Proceeds

Families often picture one check. The statute lists several methods, chosen by the borrower: a line of credit; monthly payments for a set term; monthly term payments plus a line of credit; monthly payments for as long as the borrower lives in the home (called tenure); tenure payments plus a line of credit; or any other basis HUD considers appropriate (12 U.S.C. § 1715z-20(d)(9)). The borrower may generally switch methods later, though HUD may limit that for a fixed-rate loan (12 U.S.C. § 1715z-20(d)(10)). HUD's rules also govern money taken at closing, and the lender discloses how that works for a given loan.

A reverse mortgage line of credit lets the borrower draw as needed. How the unused line can change over time is set by HUD's rules and the loan's disclosures, and every draw adds to the balance.

HUD says the amount available depends on the age of the youngest borrower or eligible non-borrowing spouse, the current interest rate, and the lesser of the appraised value, the HECM FHA mortgage limit or the sales price. That limit is the maximum claim amount, the most home value the program counts. HUD's Mortgagee Letter 2025-22 sets it at $1,249,125 for case numbers assigned January 1 through December 31, 2026.

The Federal Trade Commission says the money is "typically" tax-free and won't affect Social Security or Medicare benefits. A tax professional can speak to a specific situation.

What a HECM Actually Costs Over Time

The cost of a HECM is easy to miss because little leaves the borrower's pocket at the start. Costs are usually financed into the loan, which means they are borrowed and grow with it.

• Mortgage insurance premium (MIP). This pays for the FHA insurance. HUD's Mortgagee Letter 2017-12 set an initial MIP of 2.00% of the maximum claim amount and an annual MIP of 0.50% of the outstanding balance, for case numbers assigned on or after October 2, 2017. HUD sets these rates by mortgagee letter and can change them, so the rates that apply to a particular loan are the ones the lender discloses and HUD currently publishes.
• Origination fee. Federal rules limit this lender fee and allow it to be fully financed (12 U.S.C. § 1715z-20(r)). The lender discloses the actual amount.
• Closing costs. These fall in familiar categories such as appraisal, title and recording.
• Interest and servicing. Interest is added each month.

Federal limits are ceilings, not what a borrower pays. Before closing, the lender must give a projected total cost statement (12 U.S.C. § 1715z-20(e)(4)), and federal rules require disclosure of which charges are required and which are not (12 U.S.C. § 1715z-20(d)(2)(C)). The FTC warns the growing debt "can use up much – or even all ─ of your equity," so less of the home's value remains over time.

When the Loan Comes Due and What Happens to the House

What happens to the house later is often the real question behind the search. The opening of this guide gave the short version; the regulation spells out the details. Under 24 C.F.R. § 206.27(c), the balance comes due when a borrower dies and the home is not the principal residence of a surviving borrower, or when title is transferred and no borrower keeps title. That is why a surviving co-borrower who still lives in the home is not affected by the first borrower's death. With HUD's approval, the loan also comes due when, among the listed events:

• the home stops being any borrower's principal residence for reasons other than death;
• illness keeps a borrower away longer than 12 consecutive months and no other borrower lives there;
• property charges, such as taxes and insurance, are not paid; or
• another obligation under the mortgage is not performed.

That last group means a borrower can lose the home through foreclosure if obligations go unmet. The loan documents state the full terms.

For an Eligible Non-Borrowing Spouse, the regulation provides a Deferral Period that postpones the due date until that spouse's death, so long as its requirements continue to be met or a lapse is cured. The non-borrowing spouse rules come from HUD.

A HECM is non-recourse: the borrower or estate is not liable for any shortfall between the balance and what the home's sale brings, with FHA insurance covering the difference (12 U.S.C. § 1715z-20(d)(7)). Heirs may repay the loan and keep the home, or sell it to repay.

Knowing exactly what triggers repayment helps a family plan, especially when a spouse or an heir is part of the picture.

HECM and California Law

California layers its own rules on top of the federal program, codified in Civil Code sections 1923 through 1923.10. Civil Code section 1923 defines a reverse mortgage as a nonrecourse loan on an owner-occupied principal residence that requires no payment until it becomes due, made by a state- or federally licensed or chartered lender. Civil Code section 1923.10 applies the chapter to loans executed on or after January 1, 1998.

Before counseling, the lender must give a plain-language notice in 16-point type or larger warning that a reverse mortgage "IS A COMPLEX FINANCIAL TRANSACTION" (Civil Code section 1923.5), plus a worksheet guide in 14-point type or larger. Civil Code section 1923.2 adds, among other things:

• a list of at least 10 HUD-approved counseling agencies before a final application;
• no final application or fees until 7 days after counseling, with a signed certificate stating counseling was in person unless the applicant chose another way;
• no requirement to buy an annuity;
• prepayment without penalty; and
• temporary absences up to 60 consecutive days do not make the loan due.

The California Department of Financial Protection and Innovation says anyone making or servicing residential mortgage loans in California must be licensed, with listed exemptions such as banks and credit unions. The California Department of Real Estate warns seniors about reverse mortgage scams. California's Homeowner Bill of Rights and its Property Tax Postponement program are separate from a HECM, and a county tax office in Los Angeles, Orange or elsewhere can describe local property tax help. A HECM compared with proprietary reverse mortgages is a related topic.

California's added protections give you time and information before you commit to anything.