Reverse Mortgages: The more we know about them before we sign up for one, the better off we and our clients are.
A reverse mortgage is a loan. “A reverse mortgage is a special type of loan that allows homeowners 62 and older to borrow against the accrued equity in their homes. The loan must be paid back when the borrower dies, moves, or no longer lives in the home.” Nora David Eisenhower, “Consumer Advisory: Don’t be Misled by Reverse Mortgage Advertising” (Consumer Financial Protection Bureau, posted online on June 4, 2015).
A reverse mortgage loan is based on home equity. “The home is pledged as collateral on the loan.” Gabriela Rico, “Diligence Urged for Homeowners Seeking Reverse Mortgages” (Tucson, Arizona Daily Star posted online May 30, 2015).
When a reverse mortgage loan is insured by the Federal Government, it is known as a Home Equity Conversion Mortgage or “HECM”. See Gabriela Rico, “Diligence Urged for Homeowners Seeking Reverse Mortgages” (Tucson, Arizona Daily Star posted online May 30, 2015).
If the homeowner does not keep up the homeowner’s insurance and any other insurance required by the reverse mortgage loan, the homeowner runs the risk of foreclosure. Nora David Eisenhower, “Consumer Advisory: Don’t be Misled by Reverse Mortgage Advertising” (Consumer Financial Protection Bureau, posted online on June 4, 2015). “Tapping into home equity is one of the reasons older people run real risks of foreclosure, warned Lori A. Trawinski, who wrote an AARP Public Policy Institute Report on mortgage debt [‘Nightmare on Main Street: Older Americans and the Mortgage Market Crisis’],” quoted by Elizabeth Olson, “Paying Off the Mortgage Grows Harder for Older Workers” p. B4, col. 1 (New York Times Nat’l ed., “Personal Business,” Saturday, June 15, 2015).
For more information, contact these among other possible sites:
In the above CFPB Consumer Advisory, these steps are recommended:
If you have a question about reverse mortgage requirements, contact a HUD-approved housing counselor near you.
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For more information about how reverse mortgages work and questions to ask, read our guide to reverse mortgages for older consumers and their families. Do you or a loved one have a reverse mortgage loan? Here are three steps you should take.
In the above Arizona Daily Star article, these sites are recommended:
Q. Where can I get more information?
A. The National Council on Aging recommends the following sources for more information on using and protecting the value in your home:
- Home Equity Advisor, www.homeequityadvisor.org
- BenefitsCheckUp, www.benefitscheckup.org
- Consumer Financial Protection Bureau, www.consumerfinance.gov
- The National Reverse Mortgage Lenders Association, www.reversemortgage.org
- U.S. Department of Housing and Urban Development, www.hud.gov (type reverse mortgage into the search bar at the top of the page)
Please Read The Disclaimer. ©2015 by Dennis J. Wall, author of “Lender Force-Placed Insurance Practices” (American Bar Association 2015). All Rights Reserved.