The most popular reverse mortgage program is the Home Equity Conversion Mortgage (HECM), which is insured by Housing and Urban Development (HUD).
New rules from HUD add protections for certain surviving spouses after the death of a reverse mortgage borrower. Until recently, if the non-borrower spouse was not on the loan, he or she was not entitled to remain in the property following the death of the borrower. But under HUD’s new rules, non-borrowing, surviving spouse can remain in the home if specific conditions are met. These changes apply to reverse mortgage loans in which the borrowing spouse applied for a reverse mortgage before August 2014. In addition, the couple must have resided in the property as their principal residence throughout the duration of the HECM, and taxes, property insurance and any other special assessments that may be required by local or state law must have been paid.
The concern regarding non-borrowing spouses has been a source of many reverse mortgage issues. Here’s why: The amount of money a reverse mortgage borrower can draw is based in part on the age of the youngest borrower—and unless all borrowers are 62 or over, they would not qualify for a reverse mortgage.
For more information:
Reverse Mortgage Information
- Ask students to comment on the statement: “While a reverse mortgage can be used to supplement monthly income, some borrowers may face unintended obstacles and consequences”. What might be those consequences?
- Are the new rules from HUD effective in protecting senior citizens? Why or why not?
- Why should you talk to a qualified professional before deciding to get a reverse mortgage?
- Where can you find HUD-approved HECM Counseling Agencies near you?
Every day, approximately 10,000 people in the United States turn age 62, according to the Census Bureau. And if they are homeowners, they may be eligible to borrow against a portion of the equity in their house by using a loan called a “reverse mortgage.”
The Consumer Financial Protection Bureau (CFPB) is warning consumers about potentially misleading reverse mortgage advertising. In June 2015, the CFPB issued a consumer advisory stating that many television, radio, print and Internet advertisements for reverse mortgages had “incomplete and inaccurate statements used to describe the loans”. In addition, most of the important loan requirements were often buried in fine print if they were even mentioned at all. These advertisements may leave older homeowners with the false impression that reverse mortgage loans are a risk-free solution to financial gaps in retirement.” For example, the CFPB said, “After looking at a variety of ads, many homeowners we spoke to didn’t realize reverse mortgage loans need to be repaid.”
For more information, click here.
- Visit the website of the American Association of Retired Person (AARP) at aarp.org. Locate the AARP Home Equity Information Center, which presents facts about reverse mortgages. Then prepare a report on how reverse mortgages work.
- Ask students to visit Fannie Mae’s website at fanniemae.com/homebuyer to find out who is eligible for reverse mortgages, and what other choices are available to borrowers.
- Why should you consult a qualified professional before you decide to get a reverse mortgage?
- Where can you find Housing and Urban Development-approved Home Equity Conversion Mortgage counseling agencies near you?
Reverse mortgages are a special type of loan that allows homeowners, 62 and older, to borrow against the accrued equity in their homes. Reverse mortgages can help some older homeowners meet financial needs, but they can jeopardize retirement security if not used carefully.
In February 2015, the Consumer Financial Protection Bureau (CFPB) released a report that some homeowners have experienced problems with reverse mortgages. The most common reverse mortgage complaint is about difficulty with changing the loan terms and problems communicating with loan servicers. Some consumers, for example, express frustration about slow, inconsistent communication from their reverse mortgage loan servicer.
If you are having a problem with your reverse mortgage or having problems getting through to your mortgage servicer, you can submit a complaint to CFPB online or by calling (855) 411-2372 or TTY/TDD (855) 729-2372. The CFPB will forward your complaint to the company and work to get you a response within 15 days.
For additional information, click here.
- How can a person access funds from a reverse mortgage?
- Ask students what other alternatives might be available before settling for a reverse mortgage?
- What is the purpose of a reverse mortgage?
- Can people with very low equity in their home qualify for a reverse mortgage?
- How can people protect themselves from dishonest reverse mortgage providers that charge exorbitant fees?