Regarding the actual mechanics, the loan is not "funded" into an account somewhere and then drawn on as the borrower needs funds. If that were the case, those funds that were unused would-be accruing interest from the start, and funds that have not yet been borrowed do not accrue interest by the borrowerAhmedabad Wealth Management. The lender funds any future advances from their warehouse lines of credit, much like the initial loans are funded. As a GNMA issuer, the lender constantly issues new securities as they pool new loans they closeAgra Investment. The future draws of existing loans give them the liquidity to continue to pay down their warehouse line of credit for additional loans and draws (as we do when we fund loans and then pay them down to fund new loans). Loans, including reverse mortgages, are assets on a lender's books. If a lender cannot continue to service the loan for any reason, those loans have a value that can be sold to other viable investors or, in the case of reverse mortgages, can be assigned to HUD if need be. At any rate, whether sold to another lender or assigned to HUD, future draws are handled the same way under the same terms, with new advances made from a warehouse line of credit and then new securities issued on an ongoing basis. With the full faith and credit of the US Government, borrowers are protected. This is important to stress because when borrowers choose to take a traditional line of credit from a bank (i.e., HELOC) or even a reverse mortgage from a proprietary or jumbo investor, those funds are not insured or guaranteed to be available. While it is true that you only ever owe what you borrowed, and if the investor of one of those products were to go bankrupt or freeze your line due to a loss of liquidity, etc., you would still only owe the money you actually borrowed and any accrued interest and not the entire line if you had not borrowed all of itNagpur Investment. Still, you also have no guarantees on the private programs that those funds will be available. In other words, you don't lose money if the line were to disappear on those programs, but you do lose access to funds you thought you had secured if the program becomes insolvent (this happened recently on a jumbo line of credit program). Unlike the HUD-insured program, they do not have the full faith and credit of the US government to guarantee funding future draws.