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 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

Hello Jan,

I am going to express an opinion here that you may not like and may not be popular with a lot of folks, but it is one that I feel is warranted.

First of all, the reverse mortgage loan  is a non-recourse loan and under a scenario where the borrower lives in the home and then has to leave the home but the property will not sell for enough to pay off the mortgage, the borrower or their estate can never be made to pay anything more.

The lender can only look to the property for repayment of the obligation.

However, I have never been involved when there was any sort of misrepresentation involved and I do not know what that might do to the process.

I say that not because I know there is in this case, but your comments about the granddaughter make it sound like she has been there for some time after the senior borrower had left the premises.

If that is the case, she would have had to be signing and returning the occupancy certifications to the lender stating that the owner was still living in the home even though she was not.

That would have allowed her to live in the home without making any payments under false pretenses.

Under that scenario, I do not know if the reverse mortgage lender and HUD could seek other remedy under those circumstances.

I do not know how long ago you moved mom out of the property or how long it took the granddaughter to “wreck the house” as you stated.  Typically, that does not happen overnight.

Borrowers and family members who allow this to happen are possibly hurting the senior borrower themselves, others who seek the benefits of the program and their true heirs (such as yourself).

As you stated, the home is trashed and I hear this over and over, that family or friends who could stay in the property after the senior left (most of the time without payment to the senior homeowner) against HUD rules because they continued to live in the home after the senior had vacated the property and they did not care for the home causing extreme drops in value.

Borrowers and heirs lose money that would have been rightfully theirs.

HUD loses money on the transaction causing losses to the MIP fund and the latest repercussion we saw when the MIP fund is threatened was the extreme pull back in the program October 2017.

Borrowers who really need the program get far less money now due to the losses the program has suffered.

The senior homeowner who allowed the family members to stay rent-free now have no equity where there might have been some and they also are no longer eligible for any HUD programs due to the unpaid loss of money on their reverse mortgage while heirs like yourself are left trying to help the senior.

In the whole deal the only person who made out well was the granddaughter who got to live in a house without having to pay for it and because she had no responsibility, trashed it before she moved out.

Am I saying this is the only reason that the program parameters were cut back?  Absolutely not. But this is happening far too often, and it hurts those seniors who really need the program.

I hope that the borrower’s granddaughter did not commit fraud to stay in the home well beyond the time that the lender should have been notified of the borrower’s leaving for everyone’s sake.

I also hope that reverse mortgage borrowers understand that the program is there only if it remains viable and that they take their duty to inform the lender once they have moved out seriously, if not to protect their own equity, to keep the program available for those who come after and need it as much as they did.

Occupancy FAQs

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

A reverse mortgage can only be obtained on your primary residence that you live in 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 prior to applying for the reverse mortgage you can even 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 borrower of the reverse mortgage must reside within the “main” house.

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