Hi. I have been looking and could not find anything describing how long a person could be living outside of the home with a reverse mortgage. Also, do any warnings have to be given before someone is forced out of the home for non-compliance? Thank you.-Loren G.By Loren G. on 12.07.2018
Occupancy requirements are readily available on our website, all over our blogs, and in the loan documents themselves if you already have a reverse mortgage. HUD requires that the home be your primary residence and that you live in the house regularly for at least six months every year.
This means that if you travel every year for five months of the year or live in a second home in a warmer climate, you still meet the provisions of the loan, provided you are not using the home as a rental. The property is listed as your home on all your documents and accounts (banks, driver’s license, etc.).
In addition, HUD allows borrowers a temporary absence for up to 12 months for medical (hospice care after an illness or accident, etc.), providing they are back in the home before the end of the 12 months. They feel that your absence is probably permanent if you have not returned home within 12 months.
The lender sends notices to the homeowner annually and their monthly statements, often requesting the borrower to reply or confirm occupancy. If the lender’s requests go unanswered, they will send someone out to confirm occupancy, and if the borrower does not occupy the home, the lender will have to decide on the nature of the absence.
If the lender does an occupancy inspection and finds renters in the home, they can call the note due and payable. If that were to happen, they would notify you that you now must repay the balance of the loan and give you a timeframe in which it would need to occur before they would take additional action. It could ultimately lead to a foreclosure if you did not comply.
However, your final question is a bit of a departure from the original. Having a loan on the house never gives the lender the right to kick the homeowner out of the property. They would always have to notify you of a potential breach in the terms to allow you to respond or pay the loan off before they could take further action.
Are you referring to different issues? The first part of the question asks how long you can be out of the home with a reverse mortgage, and the second asks what notices/warnings the lender must give before being forced out for non-compliance. Because if you are already out of the home, the lender would not be forcing you out, and if you are in the home, there would be no fears of non-compliance.
Are you referring to the same issue of non-occupancy, or are you concerned about other problems that might be considered non-compliance and that different issues might be treated differently? If you are not living in the home and renting it out as a bed a breakfast facility, that would be something the lender would probably choose to address immediately.
If you are not paying your hazard insurance, that is also a breach, but the lender would use any funds in the line of credit to pay the insurance before looking to call the Note due and payable. Different breaches may call for other remedies, so I don’t want you to feel that one answer covers all situations, all possible breaches, or situations of non-compliance.