Hi. I have been looking and could not find anything describing how long a person could be living outside of home with a reverse mortgage? Also, do any warnings have to be given before someone is forced out of home for non-compliance? Thank you.-Loren G.By Loren G. on 12.07.2018
Occupancy requirements are readily available in 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 home on a regular basis at least more than 6 months of every year.
This means that if you travel every year for 5 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 and you have the property listed as your home on all your personal 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 you are back in the home before the end of the 12-month period. They feel that if you have not returned home within 12 months, your absence is probably permanent.
The lender sends notices to the homeowner annually as well as 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 as to the nature of the absence.
If the lender does an occupancy inspection and they find 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 happen before they would take additional action. It could ultimately lead to foreclosure if you did not comply.
Having a loan on the house never gives the lender the right to just kick the homeowner out of the property though. They would always have to notify you of a potential breach in the terms to give you the opportunity to respond or pay the loan off before they could take further action. Your final question is a bit of a departure from the original though.
The first part of the question asks about 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 they are forced out for non-compliance. Are you referring to different issues? 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.
I cannot tell if you are referring to the same issue of non-occupancy or if you are concerned about other issues that might be considered non-compliance and 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 different remedies, so I don’t want you to feel as though one answer covers all situations or all possible breaches or situations of non-compliance.