How long could that homeowner be absent (e.g., on an extended vacation) before they would be considered not residing in the house?  Would they be allowed someone else living in the house to care for them?

I will start with the second question as it is more straightforward to answer without reservations.

The reverse mortgage does not prohibit a borrower from having anyone else live on the property, such as a family member or a live-in caregiver.  The borrower may undoubtedly bring in help to assist them in their living needs, whether that be family or a paid medical caregiver.

If and when the borrower leaves the home to reside in a nursing care facility or passes, the loan would become due and payable.  It would be up to the borrower’s heirs to contact the servicer to make arrangements to sell the property, refinance the loan, or pay off the loan with other funds.

Occupancy Terms in Your HECM Security Instrument

In California, the Deed of Trust, which serves as the Security Instrument for HECM, has explicit provisions regarding extended absences due to health issues.  It stipulates that if the property isn’t the principal residence of at least one original borrower for 12 consecutive months post-closing due to mental or physical illness, the loan may be accelerated, meaning the debt becomes due and payable.

This implies that the loan must be settled in full if a borrower is institutionalized for health reasons beyond a year and no other original borrower resides in the home.

Leaving Home Unrelated to Health: The Undefined Territory

The Deed of Trust does not explicitly define the allowable duration for non-health-related absences, such as extended vacations.  Typically, a simple notification to the loan servicer about an extended vacation should suffice to avoid misunderstandings.

What Constitutes a Primary Residence?

The crux of the matter lies in whether the absence is extensive enough for the property to be considered no longer the primary residence.  For instance, a 3 to 4-month vacation generally doesn’t raise concerns with servicers.  However, an absence of 2 years would likely lead to the conclusion that the home is no longer the principal residence, prompting the servicer to invoke HUD rules and declare the loan due and payable.

The Gray Area of “Vacation” Absences

Unfortunately, the Deed of Trust does not specify a duration for “vacation” absences.  As such, policies can vary and are subject to interpretation by HUD and the servicer.  What is permissible now may not necessarily be so in the future if not explicitly outlined in your loan documents.

Maintaining Open Lines of Communication with Your Loan Servicer

Proactive Communication is Key

Maintaining open and proactive communication with your loan servicer is critical, especially if you plan to be away from your home for extended periods.  If you have a reverse mortgage and are planning significant travel, inform your servicer in advance.

Ensuring Compliance with Primary Residence Requirements

By keeping your servicer in the loop, they can be confident that the home remains your primary residence, a fundamental requirement of the reverse mortgage agreement.  This transparency allows the servicer to accommodate your situation without any misunderstandings arising.

Avoiding Potential Issues

Problems arise when borrowers are not forthcoming or try to conceal their extended absences.  The inability to contact borrowers can lead to the assumption that the home is unoccupied, prompting servicers to initiate procedures based on vacancy protocols.

Helpful Resources

For more detailed information, download the informative brochure on occupancy requirements from our servicing company, Celink, which provides valuable guidance on how to stay compliant with your reverse mortgage terms while enjoying extended travel.

Click here to download the Celink Occupancy Requirements PDF brochure.

Occupancy FAQs

ARLO recommends these helpful resources: 

• Reverse Mortgage Occupancy Fraud Threatens MMI Fund
• ASK ARLO: Reverse Mortgage Occupancy Requirements