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Reverse mortgage guide
An adjustable-rate HECM closes with a first and a second note, and a first and a second deed of trust (called a mortgage in some states). The first set secures the lender. The second set is in favor of HUD and secures any payments HUD makes to you if the lender ever can't. Fixed-rate HECMs pay out in one lump sum at closing, so HUD no longer requires the second set on them. The large amount printed on the documents is the most the deed of trust can secure, not what you owe.
When you sign your final HECM documents, the notary may show you two notes and two deeds of trust: a first and a second. (In some states the deed of trust is called a mortgage.) Many people are surprised by this, and even more by the large dollar amount printed on them. Don't worry. It's still one loan. This article explains why both exist, why the amount looks so high, and what you actually owe.
Every mortgage has two kinds of documents:
A regular mortgage has one of each. An adjustable-rate HECM has two of each: one set for the lender, and one set for HUD.
The first note and deed of trust are in favor of the lender. They work like any mortgage: the lender's loan is secured by your home.
The second note and deed of trust are in favor of HUD, which insures your HECM through FHA. They protect you. If the lender ever failed to make the payments it owes you, HUD could step in and make them, and the second set secures repayment of anything HUD pays out. HUD's own model second mortgage says it exists "to secure payments which the Secretary may make to or on behalf of Borrower."
That matters most if you have a line of credit or monthly payments. Those advances are promises the lender makes to you for years to come. The second note and deed of trust put HUD's backing behind those promises.
Since 2014, a fixed-rate HECM has to be taken as a single lump sum at closing. There are no future draws, so there's nothing for HUD to step in and pay later. In HUD's words, "the HECM Second Security Instrument and HECM Second Note are no longer required for fixed interest rate HECMs." HUD's current model documents include a second note and second mortgage only for adjustable-rate HECMs.
So if you're closing a fixed-rate HECM and only see one note and one deed of trust, that's normal. To compare the two, see Fixed vs. Adjustable Reverse Mortgages.
This is a separate step from the second note, and many explanations mix the two up.
Over time, a HECM balance grows. When it reaches 98 percent of the maximum claim amount, the lender may choose to assign the loan to HUD. It can also choose to assign it when a payment you ask for would take the balance to 100 percent or more of the maximum claim amount. Assignment isn't automatic, and HUD has conditions the loan must meet.
If your loan is assigned, HUD takes over the loan and its servicing. Your loan terms stay the same, and any advances still due to you continue. Most borrowers never notice much beyond a new servicer name on their statements.
A reverse mortgage has no set payoff date, and the balance grows over time instead of shrinking. HUD itself doesn't require a maximum amount on the documents. But many states require a recorded mortgage or deed of trust to state a maximum amount. If the documents showed only your starting balance, the lien couldn't cover the money advanced to you later or the interest added on top.
So in those states, HUD requires the amount stated on the documents to be at least 150 percent of the maximum claim amount. The maximum claim amount is the lesser of:
Say your home appraises at $300,000. The maximum claim amount is $300,000, so the amount stated on the note and deed of trust would be $450,000 or more.
That number has nothing to do with what you borrowed. It's the most the deed of trust can secure, set high so there's room for your balance to grow over many years. It isn't your balance, and it isn't an amount you'll ever be asked to pay. Because the HECM lending limit caps the maximum claim amount, the stated amount on higher-value homes is capped too. See Lending Limits for the current limit.
You owe only:
Your loan statement shows your current balance. If you ever need the exact amount to pay the loan off, ask the servicer for a payoff statement. That's the official figure as of a specific date, and it's what the title or escrow company uses at closing.
There are no required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. That includes any HOA dues.
The loan becomes due when the last borrower dies or moves out, or if the loan terms aren't met. If you have an eligible non-borrowing spouse, they may be able to defer repayment and stay in the home after the last borrower dies, as long as they meet HUD's conditions. No more loan money is paid out during that time. See Non-Borrowing Spouse.
And because a HECM is non-recourse, you and your heirs aren't personally liable if the balance ends up higher than the home's value. If the home sells for less than the balance, FHA insurance covers the difference. If your heirs want to keep the home, they won't have to pay more than 95 percent of its appraised value. See How a Reverse Mortgage Works.
Whether you sell, refinance, or your heirs repay the loan, the title or escrow company gets a payoff statement from the servicer and pays the real balance. Nobody pays the amount printed on the documents.
After the loan is paid in full, the deeds of trust are released and the releases are recorded with your county. The lender or servicer releases the first deed of trust. On an adjustable-rate HECM, the HUD second has to be released too, and that comes from HUD's servicer after the lender confirms the loan is paid off. Releasing the first doesn't release the second, so a good title company makes sure both get done.
If you ever see both deeds of trust on a title report later, for example when you sell or refinance, that's normal. The title company will order payoffs and releases for both.
Not usually. The two-note structure comes from HUD's rules for the FHA-insured HECM. Proprietary (jumbo) reverse mortgages aren't insured by FHA, so they follow their own lender's documents. I'll walk you through whichever documents you're signing.
No. You have one reverse mortgage. On an adjustable-rate HECM, the second note and deed of trust are a safety net that ties HUD's backing to the payments promised to you.
No. It's not a balance, and it doesn't change what you or your heirs owe. Your heirs deal only with the real balance, and they're never personally liable for more than the home is worth. See Reverse Mortgages and Heirs.
Because a regular mortgage doesn't need one. It has a fixed balance that goes down as you pay. An adjustable-rate HECM's balance goes up, and the lender owes you future advances, so HUD's backing needs its own documents.
Because a fixed-rate HECM pays out everything at closing. With no future advances, HUD no longer requires the second note and deed of trust.
Yes. Ask for the full set before your signing so you can read it without being rushed. Our philosophy is that our clients shouldn't learn anything new at the signing table.
Yes. See Can reverse mortgages be paid off at any time?
Several, including the loan agreement, the Total Annual Loan Cost (TALC) disclosure, and the payment plan. For terms you'll see at signing, try the Reverse Mortgage Glossary and What Is the TALC?
If you have questions about your documents before closing, I'm glad to walk you through them page by page. Call us at 530-888-6000.
ZYNG Mortgage, Inc., NMLS #76801. A reverse mortgage has no required monthly mortgage payments and uses your home's equity. Fees, mortgage insurance and other costs can be added to the loan balance, and the balance grows over time as interest is added, so your equity typically decreases. When the loan becomes due, the home may need to be sold, or the loan repaid from other funds. Interest is not tax-deductible until it is paid, in part or in full. You keep title to your home and must keep paying property taxes, homeowners insurance and upkeep, and meet the other loan terms; not doing so can make the loan due and could lead to foreclosure.
This material is not from HUD or FHA and was not approved by HUD or a government agency.
HECM count at the top of this page: HUD data through September 2026 (source, opens in a new tab).
