Reverse Mortgage Safety and Security
Over the past 20 years, more then 660,000 Americans have taken out a reverse mortgage. While studies have shown very high satisfaction rates among these borrowers, it is important to us that you make an informed decision and avoid the pitfalls possible in a reverse mortgage transaction.
Understanding the Reverse Mortgage
A Reverse Mortgage is a LOAN
While a Home Equity Conversion Mortgage (“HECM”) Reverse Mortgage is insured by the Department of Housing and Urban Development, it is NOT a government benefit. It is a unique type of loan.
BEWARE OF FALSE STATEMENTS! “Once you have a reverse mortgage, you can live in your home forever.” is FALSE. It would only be true IF you have met the requirements of the loan. Most important, YOU ARE STILL REQUIRED TO PAY YOUR PROPERTY TAXES, HOMEOWNERS INSURANCE AND MAINTAIN THE CONDITION OF YOUR HOME. If you do not pay the property taxes…if you do not pay the homeowners insurance…if you do not maintain your home…if you do not live in your home for at least six months out of the year…the lender can foreclose!
Prior to securing a reverse mortgage, make sure you can afford to pay your property taxes, homeowners insurance and maintain your home. In addition you must be aware that these obligations may not be paid through your loan. Most reverse mortgages don’t offer the ability to escrow for your taxes and insurance. Therefore, you must know that you will need to directly pay your taxes and insurance when they come due.
There are different types of Reverse Mortgages
iReverse Home Loans offers two types of reverse mortgages. Over 99% of the reverse mortgages that we originate are FHA-insured Home Equity Conversion Mortgages (HECM). We also offer one proprietary non-insured reverse mortgage for “jumbo” loans… typically for multi-million dollar homes. We strongly advise against taking out any other type of reverse mortgage not insured by the Federal Housing Administration. In particular, we do not recommend participating in “shared-equity” types of reverse mortgage offered by some lenders.
BEWARE of these Red Flags!
You should NOT feel pressured to go through with a reverse mortgage transaction. If you are being pressured by anyone (reverse mortgage specialist, family member, friend, financial planner, investment adviser, etc)…DO NOT PROCEED with the transaction until such time as YOU fully understand the program and wish to proceed without pressure from anyone.
Investing Reverse Mortgage Proceeds
NOBODY should be selling you any financial, insurance or investment products/services in conjunction with your reverse mortgage. While it is your choice how you wish to spend your reverse mortgage proceeds, we strongly advise against handing over your proceeds to anyone to invest, purchase annuities, etc. In fact, we prohibit our employees from cross-selling any other products and/or services. Before handing your loan proceeds over to anyone, please get a second and third independent opinion from a family member and/or trusted adviser.
YOU Select the Counselor
Your reverse mortgage specialist should provide you with a list of HUD approved independent reverse mortgage counselors. While it is permitted to perform the counseling via telephone, you have the right (and we recommend) meeting the counselor face-to-face. Either way, your reverse mortgage specialist should NOT suggest one counselor and/or agency over another. He/she should NOT be involved in the scheduling of the counseling session. The counselor must be truly independent and exists to help make sure the reverse mortgage is the best choice for you. There should be no contact between the reverse mortgage specialist and the counselor.
Potential Effect on your Government Assistance
If you receive government assistance, you need to contact your advisers and/or the appropriate government agencies to determine the effect taking out a reverse mortgage may have on these types of benefits.
While reverse mortgages shouldn’t affect your Social Security or Medicare benefits, it could affect Medicaid benefits and Supplemental Security income. If you take all your money upfront and deposit the proceeds into your bank account at once, you could make yourself ineligible. In fact, if you don’t spend the reverse mortgage payouts within the same month, you could be over your Medicaid or SSI asset limit, which is $3,000 for couples and $2,000 for singles, and your eligibility for these programs could be in jeopardy. Contact your financial adviser or SSI administrator to make sure you’re safe.
Taking a Spouse off Title
We strongly advise against taking one spouse off the title to your home in order to qualify for a reverse mortgage. For example, if one spouse is under the qualifying age of 62, some lenders may recommend taking that spouse off the title so the other spouse can qualify. We do not recommend this. If you are considering this, we urge you to speak with your attorney to discuss the potential consequences in the event of the death of the spouse. Again, we advise against removing anyone from your home’s title in order to qualify for a reverse mortgage unless you have received independent advise that it is in your best interests.
Signing Blank or Incomplete Documents
Do NOT sign any document with missing or inaccurate information. Before you sign any documents regarding your reverse mortgage loan, make sure you carefully review every word on every section. If you see that some information has been left blank or if you notice that some information is incorrect, this is a definite red flag. Even if the so-called lender assures you that the information will be filled in or corrected later, you should refuse to sign anything until the corrections are made. Keep copies of everything you sign for your own records.
It’s not clear who the loan officer works for
No reverse mortgage loan officer and/or lender should represent themselves as a government representative. Any lender who represents themselves as a government official should not be trusted. Every loan officer and every lender should be able to identify their Nationwide Mortgage Licensing System & Registry (“NMLS”). You can lookup their information by going to http://www.nmlsconsumeraccess.org/.