Most reverse mortgage critics do not know about the changes made in 2014, 2019, and 2021. Recall that these changes allow a non-borrowing spouse under age 62 to enjoy the benefits of the HECM as long as she lives and lives in the property. Most criticisms come from people who have not studied the new reverse mortgage rules.
Assume that the husband is 62 or older and the wife is younger. She can remain on title, but she will not sign “on the loan”. She is called an eligible non-borrowing spouse. When her husband dies, she will enjoy all of the borrowing husband’s benefits under the HECM. Even if the husband has moved to assisted living, she will enjoy the benefits of the HECM as long as she lives in the property as her personal residence.
Sometimes the complaint is not about the borrower “losing the home” but about the younger spouse “losing the home.” The changes made in 2014, 2019, and 2021 now protect the younger spouse from losing the loan and therefore being forced to sell.
Further, “losing the home” was generally not as disastrous as the critics implied because the surviving spouse could sell the home. The bank is not taking the property except in very rare cases where the borrower lived in a declining market and lived to a very old age.
If the wife has moved from the home for more than a year, she would be able in most markets to sell the home and walk away with the equity – minus closing costs.
And if the non-borrowing surviving spouse could keep the home if she could refinance into a regular loan. Again, all this has been changed under the 2014, 2019, and 2021 rule changes. Non-borrowing surviving spouses can in most cases keep the reverse mortgage.
Sometimes the complaint is not about the borrower “losing the home” but about heirs “losing the home.” Again, “losing the home” is generally not disastrous. The heirs cannot expect to keep the reverse mortgage with its no-payment provisions. The reverse mortgage fund would lose money if heirs could keep the property and pay no mortgage payments for life.
The heirs will not lose the home if they can refinance. And if they cannot refinance, they can can sell the home and walk away with money.
The “losing the home” criticism was never presented accurately. It was misrepresented as the house going back to the bank, which almost never would happen anyway.
