Skip to content

“Oh, you all take the home!”

That’s what I heard from a vendor at a professional event for financial advisors and insurance professionals. It was another reminder that many people still don’t know how a reverse mortgage works. And just how helpful this type of mortgage is to thousands of Americans in their retirement. 

As a housing wealth advisor, that statement is both my Kryptonite and my opportunity. 

  • Kryptonite, because it reminds me of the disservice that actions in the industry pre 1988 has done to the public, who could benefit from the true facts on this product. 
  • Opportunity, because it gives me a chance to clear up and show another person who was misled by the past. 

When we talk about protections, we’re talking about The Modern Reverse Mortgage.  In 1988, President Reagan took the reverse mortgage and put it under the management of HUD. HUD weeded out the bad actors and built in protections. One of those being FHA insurance. This is, in my opinion, the most important! The FHA insurance protects the homeowner, their heirs and their estate from ever owing more than the home is worth. 

Along with that important protection, there are some guarantees that come along with the mortgage. We call them the “4 Nevers”:

  • You never give up title to your home.
  • You never owe more than the home is worth.
  • You never have to move.
  • You never have to make a mortgage payment.
    • (a) You never pay taxes on the proceeds of the reverse mortgage.

Now along with the 4 Nevers, you have some obligations:.

  • The property must be your primary residence.
  • You must keep up to date with all property related charges (we can also set up escrow for that in specific cases).
  • You must maintain your homes condition. 

Those all seem very simple, but let’s talk some more about protection for the borrower. The borrower(s) is required to go through a counseling session with a third-party HUD counselor. The counselor does not work for a lender, they work for HUD. This session in most cases is done over the phone (some states require in person) and is usually an hour and a half or so. It’s there to make sure the homeowners understand the math and obligations/protections that I just stated. It’s also a check and balance to make sure the loan officer working with the clients has told them everything they need to know. 

Homeowners learn this is a non-recourse loan. Meaning they are never held liable for monthly mortgage payments. The home guarantees the mortgage, and thus allows them to live a better retirement with their housing guaranteed and the ability to have more personal cashflow that is not taxed. The mortgage is never due until the last remaining borrower exits the home permanently. The protections even go past that to the heirs “in the end”. 

The last protection I will cover is the right of recission. The homeowners have 3 business days after signing their closing documents to opt out for any reason. 

There is more, but I will leave you with this. This is not a one-size fits all. It is a valuable “Fourth Bucket of Retirement” and “If this could cure a worry or bolster a plan for retirement, would you like to see how it works?”

Donald Battista, NMLS ID 2030959. Please consult a tax professional. Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Arizona Mortgage Banker License 0926603. Florida Mortgage Lender Servicer License MLD1827. Louisiana Residential Mortgage Lending License 1025894. Oklahoma Mortgage Lender License ML012498. Texas Mortgage Banker Registration 1025894. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org | Equal Housing Lender