Reverse mortgages are a 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 in retirement. Most reverse mortgages today are federally insured through the Federal Housing Authority’s (FHA) Home Equity Conversion Mortgage (HECM) program.
We’ve heard many complaints from consumers who 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.
We’ve also heard from consumers regarding non-borrowing spouses who are facing the loss of their home after the borrowing spouse has died. Recent changes to the federal program that insures most reverse mortgages allows some non-borrowing spouses to remain in the home after the death of the borrower spouse for HECM loans originated after August 4, 2014. Since this change is not retroactive, spouses of reverse mortgage borrowers who took out their loan prior to August 4, 2014 could be more likely to face losing the home when the borrower dies.
Here are 3 things you or your loved ones should do if you have a reverse mortgage:
1. Verify who is on the loan
If you took out a reverse mortgage with two borrowers, check with your reverse mortgage servicer to make sure its loan records are accurate. Call your servicer to find out what names are listed on your loan. They may be able to help you over the phone. See your reverse mortgage statement for the phone number, and ask them to send you this information in writing for your records. You can also write a letter requesting information.
2. If your reverse mortgage is in the name of only one spouse, make a plan for the non-borrowing spouse
If your reverse mortgage is in the name of only one spouse, contact your loan servicer to find out if the non-borrowing spouse may qualify for a repayment deferral. A repayment deferral allows a non-borrowing spouse to remain living in the home after the death of the borrowing spouse. If not, make a plan in the event the borrowing spouse dies first and the loan becomes due. If you or your spouse are not on the loan but believe that you should be, promptly seek legal advice.
If you have enough remaining equity in your home, you could consider taking out a new reverse mortgage with both spouses. You’ll have to pay loan fees again, however, for the new loan. If the non-borrowing spouse can’t pay off the reverse mortgage when the borrowing spouse passes away, he or she might consider a new traditional mortgage if they have the income and credit to qualify. Also consider other family members that would be willing to cosign on such a loan. Some surviving spouses may need to sell the home and make plans for where they will live after the home is sold. Contact a HUD-approved housing counselor near you to explore your options.
3. Talk to your children and heirs – make a plan for any non-borrower family members living in the home
Make sure your adult children or any family members living in the home know what to expect when your reverse mortgage comes due. If they wish to keep the home, contact your reverse mortgage company for written information that explains their options. Discuss this information with your family and follow up with the reverse mortgage company for anything you don’t understand.
If you have a problem with your reverse mortgage
If you’re having a problem with your reverse mortgage or having problems getting through to your mortgage servicer, you can submit a complaint online or by calling (855) 411-2372 or TTY/TDD (855) 729- 2372. We’ll forward your complaint to the company and work to get you a response within 15 days.
For more information about how reverse mortgages works and questions to ask, read our guide to reverse mortgages for older consumers and their families.
Check out Ask CFPB to learn more about reverse mortgages.