My mother has a reverse mortgage and recently had to go into a nursing home as she is terminally ill. Her reverse mortgage has been sold a few times (that is normal). According to the agreement, we had to notify “said reverse mortgage company” that she was no longer living in the property. We were told by phone (we failed to document who, what, and where) that we had six months to sell the property and possible extensions of up to a year. Two weeks later, we received a notice that the foreclosure process had started and that if we did not acknowledge the letter they sent within 30 days that the debt was valid. The loan must be paid off within 30 days to stop the foreclosure. We have a realtor set up to sell the property once the estate sale is complete, the property will not be sold anywhere close to 30 days, but we do expect it to be sold before the six-month mark. What steps do you recommend we take considering this situation?

Firstly, I tell borrowers to use the time allotted in the legal documents to their advantage. The agreement states that absences longer than 12 months constitute a permanent move, so I advise borrowers and their families to begin planning to sell the home as soon as they know that a reverse mortgage borrower will not be returning.

The notice outlined in the Deed of Trust that you mention refers to property that ceases to be a borrower’s primary residence by reasons other than death. The other absence it refers to is the borrower (s) moving to another home, renting the subject property, etc. Families know the move is permanent long before the 12 months allotted to the borrower to be absent from the home in the legal documents. This alone gives most families many extra months as most time.

The Terms then go on to further outline the absence the borrower is allowed up to 12 consecutive months before the lender can call the loan immediately due as it is deemed that absences longer than 12 months are permanent and are no longer temporary, which are allowed.

I have heard others say that they were told they had 6 months with a 6-month extension as well, and I cringe when I hear this statement because it depends on whether the absence is due to death or what. I urge all borrowers and their families to read the legal documents as they dictate the terms of the loan, and they should know what their plans will be should this arise.

Your lender can require immediate payment of all sums due, which is specifically spelled out in the Deed of Trust:

The lender may require immediate payment in full of all outstanding principal and accrued interest upon approval by the Commissioner if:

(i) The Property ceases to be the Principal Residence of a Borrower for reasons other than death, and the property is not the Principal Residence of at least one other Borrower; or (ii) For a period of longer than twelve (12) consecutive months, a Borrower fails to occupy the property because of physical or mental illness, and the property is not the Principal Residence of at least one other borrower; or (iii) An obligation of the borrower under the Security Instrument is not performed. Payable status is not permitted when a Lender requires immediate payment in full under Paragraph 6.

Download our sample reverse mortgage loan agreement.

Seek Legal Counsel 

I am not an attorney and cannot advise you legally, but I suggest contacting legal counsel. If your mom has not been out of the home for 12 months, she has not violated the terms of the agreement as of this time, and only your notification that it is no longer her primary residence has allowed them to start anything.

Can she move back now if it has been less than 12 months? If so, action would likely stop the process as she would follow all agreement terms, and you could demonstrate that your first notification was in error.

If later she was forced to move back to a nursing home, remember the terms (ii) above, and while you are determining whether or not the departure is temporary or permanent, you may want to take whatever steps are necessary so that if the departure looks like it will become permanent, you are ready for that eventuality.

In this manner, you can certainly take steps to contact a realtor and place the home on the market while mom is still in her 12-month temporary absence period before you must contact the lender to notify them that she will not be returning if that becomes necessary (and if the home has not sold before then).

Occupancy FAQs

Q.

Can a reverse mortgage be used for nursing home expenses?

Yes and No. If the borrower (s) already reside in a nursing home, a reverse mortgage is not an option, as the property must be the primary residence. Subsequently, if you obtain a reverse mortgage and then move out of the property to a nursing home, the reverse mortgage would need to be paid off by either refinancing or selling the property because the loan would be called due and payable at that time that the home was no longer the primary residence. However, If there is at least one original borrower still living in the home, a reverse mortgage may be used to assist in the funding of nursing home expenses, as there are no restrictions on what you use the proceeds for as long as the loan is in good standing.
Q.

Can you lose your home if you leave to a nursing home?

Possibly yes. When you have a reverse mortgage, one of the requirements is that the property must be your primary residence. If you vacate the property to a nursing home, that would be a maturity event, and the loan would be called due and payable. However, if someone has a reverse mortgage and a relocation to a nursing home is going to be required, there are steps you can take to address the reverse mortgage before moving out of the home. You can refinance the loan to a traditional loan, pay it off with other available funds or sell the property.
Q.

How long can you leave your home if you have a reverse mortgage?

You must live in the home for more than half the year for the home to be considered your primary residence. Vacations are fine if you meet this requirement. Still, if you leave your home for medical reasons, you may leave up to 12 months before the absence is considered permanent under the loan terms and the loan becomes due.
Q.

Can the reverse mortgage lender find out I went to a nursing home?

Reverse mortgage lenders conduct occupancy inspections and do have other methods to determine occupancy. If you know that you must permanently leave your home, it is best to make whatever provisions are required to repay the loan (sale, refinance, Deed to heirs so that they can finance in their names, etc.) before the lender forces action.
Q.

How long do heirs have to pay off a reverse mortgage?

The loan becomes due when the borrower no longer occupies the home as their primary residence. If the heirs are making good faith efforts to sell the home or refinance the loan, the servicer will work with the heirs and typically give several 3-month extensions to a year (sometimes longer). However, suppose the lender feels there is no honest attempt to repay the obligation, the heirs are not communicating with them, etc. In that case, they are not obligated to wait for 12 months to begin foreclosure as that alone can take 5 months or longer to complete once begun.

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