In my previous post, I attempted to sort out the short-sighted claims of some industry “reporters” that go out of their way to come up with illogical, uninformed reasons why reverse mortgages are the work of the devil.
Now I realize that seems like a harsh description of their work, but unfortunately, it’s the truth.
A handful of writers, tasked with generating “click-bait” for their respective publication’s web sites, often resort to the kind of shock tactics that were big during the era of McCarthyism.
While I implore you to do your own research and to reference credible, trustworthy resources, I also encourage you to check out some of these doom-and-gloom accountings of the reverse mortgage industry.
I do this so you can see for yourself just how weak and full-of-holes their arguments are and in doing so, you will gain some important peace of mind knowing that providers such as myself are giving you the most accurate, up-to-date, reliable information about reverse mortgages available on the internet.
It’s imperative that you give consideration to both sides of the argument when making any major decision – especially financial ones of great value.
When you do this, you weigh both sides of the argument and come to the best, most relevant decisions for your particular set of circumstances and can make choices that reflect your and your family’s best interests without remorse or regret.
In the meantime though, make sure to read on and see how and why I debunk their claims.
As I mentioned last time, most of their rhetoric is simply misinformed.
They basically didn’t do their homework.
But as a potential reverse mortgage borrower who has had the good fortune of stumbling across my site, I will make absolutely sure you have done yours before you make the decision to pull-the-trigger on one of the most important investments of your life.
And with that said, let’s tackle some more of the misconceptions held by the media about reverse mortgages…
Will My Spouse Lose the House When I’m Gone?
Short answer: No.
This is an unfounded scare tactic plain and simple.
First of all, please read my article regarding heirs and their role in your reverse mortgage located here.
It gives a detailed description of what happens to your surviving family members once you’re gone, what they’re entitled to, and what their responsibilities are concerning your leveraged property.
As for the idea that all those living in your home once your die will be evicted – nothing less than fiction.
If your spouse is listed as a “co-borrower” in your reverse mortgage contract, then absolutely nothing happens to the loan or property after your passing.
He/she will continue to live in the home without hassle and continue to receive reverse mortgage proceeds as agreed upon in the loan contract.
In a situation where a spouse is not listed as a co-borrower in the reverse mortgage contract, he/she will still be allowed to remain in the house given the following conditions:
- He/she is married to the borrower at loan closing.
- He/she is still married to the borrower when they die.
- He/she is named as a spouse in the loan documents.
- He/she lives in the property as their primary residence.
- He/she is able to establish legal ownership of the property (they have 90 days from the borrower’s death to do this).
- He/she continues to meet the requirements of the reverse mortgage by maintaining the property (taxes, upkeep, etc.)
Years ago, this wasn’t the case, however, in recent years the government has rectified the situation and it is now law that surviving, non-borrowing spouses can remain in a home as long as they continue to honor the contract their borrowing spouse made with the lender.
Please take the time to read more about this stipulation here.
Having said all of that though, for all of my Texas borrowers, I do have some bad news:
- Texas has legislated “Homestead Laws” that prevent non-borrowing spouses from enjoying the privileges I mention above.
- Those non-borrowing spouses in Texas will need to either payoff the reverse mortgage or take out a new one in their name in order to remain in the property after their spouse’s passing.
The idea though that helpless widows or widowers, on in their age, will be thrown out into the street once their borrower spouse dies is just a flashy headline that gets people to spend time on a publication’s page.
Remember, that’s what media outlets are in the business of nowadays – getting eyes on webpages so they can sell advertising.
Are Seniors Preyed Upon by Reverse Mortgage Lenders?
You simply can’t execute a reverse mortgage contract without proof that you have completed this training and the counselors aren’t legally able to “pass” you until they can verify that you understand the information that has been relayed.
If you’re interested in learning more about reverse mortgage counseling, please take a minute and read my article on the subject here.
In addition to borrower counseling, reverse mortgage originators and lenders are subject to regulations and oversight in the form of:
- Limits on the amount of commission they can receive.
- Restrictions on what they can say when advertising their services.
- Strict licIt’s understandable that the idea of “predatory lending” is still a hot topic and bouncing around in any potential borrower’s mind.
- The sub-prime mortgage crisis of less than 10 years ago almost decimated our economy with shady practices and in some people’s minds, their next logical step is to exploit those who are eligible for reverse mortgages, right?
- Well, in a rather boring twist to the story, the reverse mortgage industry has always had controls in place aimed at protecting borrowers and lenders alike from the types of abuses the traditional lending industry engaged in for decades.
- So no, there is no predatory lending when it comes to reverse mortgages.
- For one thing, all borrowers are mandated to go through “loan counseling” so that they have a thorough understanding of what they are getting into.
- ensing requirements (both state and federal)
- Mandatory comprehensive education.
- Advocacy organizations:
- Consumer Finance Protection Bureau (CFPB).
- Better Business Bureau (BBB).
- National Reverse Mortgage Lenders Association (NRMLA).
When you think about it, HUD didn’t invent this program with the intent of benefitting the mortgage industry at the expense of seniors.
This was a lifeline program that was developed to assist seniors in need who might not have the resources available to sustain their lives through social security funds alone.
The idea that this product would be offered up a yet another way for banks to get richer is completely absurd.
Lenders take a huge risk offering this type of loan.
There’s absolutely no guarantee that they will recover their investment once the borrower passes on.
For the media to insinuate that reverse mortgages are wealth-increasing programs (for either borrowers or lenders) rather than financial supplement vehicles is irresponsible and does nothing but mislead potential borrowers.
Again, I recommend you take the time to rifle through my knowledge base on all things reverse mortgage to gain some honest, in-depth knowledge about the product before even considering your next steps.
Where Should I Get Reverse Mortgage Information?
If you’re reading this, that’s a good start.
I always recommend going straight to the horse’s mouth though, so check the following as well:
- HUD – Reverse Mortgage for Seniors
- FTC – Reverse Mortgage Consumer Information
- NRMLA – National Reverse Mortgage Lenders Association
- AARP – American Association of Retired Persons
- CFPB – Consumer Finance Protection Bureau
- Bankrate – Info about current loan rates and program information
These are all trusted sources of general information about the reverse mortgage program, its requirements, its benefits, and all the laws surrounding its operation.
When you’re done with that, take the next step and contact a seasoned reverse mortgage originator.
That’s what I do and my sole responsibility is to help you understand the process as well as help you make the best, most appropriate decisions for your financial future.
Like I always say, it’s important to do your own research, but it’s just as important to reference trustworthy human sources of information that can answer your questions and consider your specific set of circumstances.
So, when you’re ready to move forward, make sure to contact me or one of my colleagues in the industry.
I can be reached anytime via email at: [email protected] or by simply clicking on the button below.
If you’re a Dallas, TX resident and would like to speak with me directly, feel free to call my local line at (972) 803-3073 or from anywhere else in Texas via my toll-free number at (800) 304-4143.
My promise is that I will never give you false information or lead you down a path that isn’t the best possible use of your resources and time.
I’ll always have your interests at heart and I have the knowledge and experience to guide you down the path to financial success.
Make sure to check back regularly for more “plain English” explanations of what reverse mortgages are all about.