Because of health issues, I’ve moved my Mom in with me, and at some point, I will most likely have to move her to a nursing home. Her granddaughter lived there until a couple of weeks ago. She has wrecked the house. The monthly statement has the house at way more than I could ever sell the place for to pay it back. What are my options? ~Jan

Reverse mortgages are designed as non-recourse loans, offering a significant safety net for borrowers and their estates. In situations where the property’s sale doesn’t cover the mortgage, neither the borrower nor their heirs are obligated to pay the deficit.  The lender’s recourse is limited strictly to the property for repayment, ensuring financial protection for the borrower’s family.

Reverse Mortgage Occupancy Fraud Continues to Threaten MMI Fund

Unpopular Opinion: The Misuse of Reverse Mortgage

The unintended consequences of mismanagement within the reverse mortgage program are profound and far-reaching. Some homeowners who generously allow family members to live rent-free in their homes can face the grim reality of vanished equity—a stark contrast to the financial security they might have otherwise enjoyed.  This fraud depletes their home’s value and disqualifies them from future HUD programs due to the financial losses incurred.  Heirs, earnest in their efforts to support their elderly family members, are left navigating the aftermath of these decisions.

The Gray Area of Misrepresentation

Concerns arise when discussing long-term occupants like this granddaughter living in the home under questionable circumstances.  If these occupants falsely certify the original borrower’s presence to avoid mortgage payments, they exploit a loophole, leveraging the system under false pretenses.  This breach of trust raises ethical and legal questions, potentially inviting stricter scrutiny from HUD.

Consequences of Neglect

The deterioration of a property doesn’t occur overnight.  It’s often a slow descent, exacerbated by negligence or deliberate destruction.  Families and residents who contribute to this decline diminish the property’s value and undermine the senior borrower’s financial legacy.  This behavior has far-reaching effects, impacting the immediate family and the broader community of future reverse mortgage borrowers.

Ripple Effect on the HECM Program

When properties are left in disrepair, the financial repercussions extend beyond the immediate family to affect the Mortgage Insurance Premium (MIP) fund.  This fund, crucial for the stability of the reverse mortgage program, suffers when properties plummet in value due to neglect.  The strain on the MIP fund led to significant program restrictions in October 2017, illustrating the delicate balance between borrower benefits and program sustainability.

Call for Responsibility

This situation underscores the need for responsibility among borrowers and their families. Misuse and neglect of the reverse mortgage program harms the involved parties and jeopardizes the program’s integrity and future.  It’s a reminder of the collective duty to uphold the principles of respect and care for property and financial resources, ensuring that reverse mortgages remain a viable and beneficial option for seniors seeking financial security in retirement.

Occupancy FAQs


Do you have to live in your home for a reverse mortgage?

A reverse mortgage can only be obtained on the primary residence that you live in for most of the year.  If you do not reside in the property once the reverse mortgage is placed on the home, you would need to pay off the loan or risk having the loan called due and payable.


What happens when you move out of a home with a reverse mortgage?

If you have a reverse mortgage on your home and move out of the home, you will be in violation of the terms of the loan agreement.  By doing this, the loan will be called due and payable once you have been out of the home for 12 consecutive months.  To avoid having the loan go into foreclosure, you would need to refinance the loan to a conventional loan or pay it off in full by either a sale or use of other acceptable funds.


Can someone live with you if you have a reverse mortgage?

Yes, you are permitted to have others living with you in your home.  There are no restrictions on having family members or friends living in the property so long as you are living in the property as your primary residence.

Can you rent a room in your home with a reverse mortgage?

Yes, you are permitted to rent a room to someone in your home when you have a reverse mortgage.  If you have been renting a room to someone for 2 years before applying for the reverse mortgage, you can use that income to help qualify for the loan.


Can you have a tenant with a reverse mortgage?

Yes, you can have a tenant when you have a reverse mortgage.  One example would be if you own a duplex (2-unit home).  You can rent out 1 unit so long as you live in the other as your primary residence.  You can also rent a room within a single-family residence or condo.  The only restriction as it relates to a tenant is when you have a single-family home with a guest house.  HUD does not permit you to rent out the main house while living in the guest house.  The reverse mortgage borrower must reside within the “main” house.

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