Margaret has sent the following question on our blog:
I have a reverse mortgage, and I’m having problems with it. Was it legal to get a reverse mortgage without my lawyer explaining the situation? I never knew the pros and cons of a reverse mortgage. I think it’s a legal way to swindle homeowners out of their homes. How can I get out of the reverse mortgage?
I am sorry if you have regrets now. You can get out of the reverse mortgage without penalty by refinancing into a traditional loan, paying off with other funds, or simply selling your home.
If you don’t like the balance rising, repay each month towards the interest charges and protect your equity position.
You’re in the driver’s seat!
REVERSE MORTGAGES ARE HIGHLY REGULATED
Furthermore, I’m afraid I have to disagree with such a broad and defamatory statement as this when the resources are so readily available. I wonder why you feel you were denied access to your lawyer or any opportunity to learn the pros and cons of a reverse mortgage.
The lender must allow you to pick your HUD-approved counselor, and you must attend a HUD-approved counseling course. The counselor must spend at least 45 minutes to an hour with you, and I have had borrowers who said their session lasted over 4 hours with all the questions they had.
In short, the number of questions and the time spent is limited by your asking, which must happen before you can even start the loan process. Only after completing this counseling course can you proceed with the loan.
Next, you apply, and your processing takes a good 30 – 45 days, during which you are free to take your application package to anyone you choose for advice.
I cannot defend or chastise your originator because I do not know who that was. Still, we encourage borrowers to get advice from family and any legal or accounting professionals they choose.
Finally, when you receive your loan documents, you have another 3-day right to rescind the transaction with no costs even after you sign. This period does not include the day you sign, Sundays, or Holidays, so your 3-day right of rescission turns into a minimum of 4 days and often 5 days.
So, you have yet another opportunity to seek assistance from anyone you choose during this time with your actual loan documents.
WERE YOU DENIED THESE OPPORTUNITIES?
Even if you didn’t make a single phone call or visit a single attorney during any of this time, if you do just an internet search on your own words, “pros and cons of a reverse mortgage,” the term auto-fills in the search bar meaning it is a popular phrase—more than 200 URLs of available results from attorneys, lenders, HUD, AARP, etc.
The last thing any lender wants to do is to “swindle you out of your home.”
And you had ample time to seek your attorney to assist you in deciding if you felt you were incapable of doing so. If you feel that you made the wrong decision, I can understand that; we have all had buyer’s remorse at one time or another.
Many borrowers occasionally ran into bad originators or lenders who may not have been the best advocates for the borrowers in handling the loans.
But I’m afraid I have to disagree with any characterization that seeks to paint the reverse mortgage process as one that doesn’t allow borrowers to have their advisors, legal or otherwise, review the transaction or as one that is solely trying to swindle homeowners out of their homes.
I do not know what state you live in, but many states also have cooling-off periods designed to give borrowers additional time to consider the transaction at the beginning of the loan.
Here in California, lenders cannot proceed with the loan for 7 days after the counseling to give borrowers even more time to consider the loan. Include your trusted financial or legal advisor if you need clarification on contract terms or ramifications.
The loan process is a lengthy one. There is no reason whatsoever not to make sure you understand everything in advance instead of experiencing remorse later.
How does someone get out of a reverse mortgage?
Can I walk away from a reverse mortgage?
Can I negotiate a reverse mortgage payoff?
Why do people say reverse mortgages are bad?
Do you have the right to rescind a reverse mortgage?
ARLO recommends these helpful resources: