Financial Hardship in a Reverse Mortgage

Protecting Loved Ones From Financial Hardship

Because many consumers do not understand the long-term financial impact of reverse mortgages, the CFPB is issuing an advisory to help reverse mortgage borrowers. The advisory highlights three ways consumers who are the borrowers on the loan can help plan so that their surviving heirs are not harmed:

Verify who is on the loan: If two borrowers took out the reverse mortgage, they should check with the reverse mortgage company to make sure its loan records are accurate.

Plan ahead for the non-borrowing spouse: For consumers who took out a HECM reverse mortgage in the name of only one spouse before August 4, 2014, they should contact their loan servicer to find out if the non-borrowing spouse may qualify for a repayment deferral. If not, they should make a plan in the event the borrowing spouse passes away first. Couples with enough remaining equity could consider taking out a new reverse mortgage, but they will incur new loan fees. Some surviving spouses may also be able to pay off the reverse mortgage, or take out a traditional mortgage, perhaps with another family member. Many will need to plan for where they will live after the home is sold to repay the loan. If the loan was originated after August 4, 2014, new changes to the HECM program will allow the non-borrowing spouse, meeting certain conditions, to remain in the home.

Plan ahead for other family members living in the home: Consumers should make sure any children or other family members living in the home know what to expect when the reverse mortgage is due. If those members want to keep the home, the borrower should contact their reverse mortgage company to have them explain their options. They can also contact a HUD-approved housing counselor to explore their options.

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