Are Reverse Mortgages a Scam? Here’s the Facts You Need to Know

Q: When is a reverse mortgage a good idea?

When you want to remain in your home and have no intention to move in the short term, if you know that the relief from the current mortgage payment or the payment you will receive from the reverse mortgage will make all the difference in your lifestyle, then a reverse mortgage may be right for you. If you love the home in which you live but need a little help financially to remain, a reverse mortgage could be just the answer. Your way of life could be more fulfilling because you are hampered by being short of monthly funds but still active. It would take little to improve the quality of your life, a reverse mortgage could be a great way to augment your income for life.

Q: When is a reverse mortgage NOT a good idea?

If you run your numbers and you feel that things will still be too tight even after the reverse mortgage, it may be time to downsize instead. If your home no longer meets your needs, is too big, or doesn't have the amenities you need, a reverse mortgage will not solve those issues. If you want to move in a year or two, the costs of a reverse mortgage are too high to use as interim financing. A reverse mortgage can be a bad idea if you want to maintain all your equity to leave to an heir or cause.

September 8, 2024

Michael G. Branson Edited by

Cliff Auerswald

32 comments

The reverse mortgage is a scam! I am a banker, and I see elderly customers getting deceived daily by these ‘reverse mortgages.’ They end up losing everything and put their heirs in jeopardy. -Tim

As a mortgage banker with over 45 years of experience, I’ve worked with many major banks, mortgage companies, and insurance firms, handling a wide range of lending products. While some financial products can be less favorable or risky for borrowers, reverse mortgages are not a scam.

The key to avoiding confusion and misinformation is education. Understanding how reverse mortgages work and involving family members in the decision-making process is crucial. When relatives are well-informed, they can better assess how the reverse mortgage will affect heirs and ensure everyone is on the same page.

Informed decisions prevent misunderstandings, and labeling reverse mortgages as a “scam” doesn’t reflect the true nature of this government-regulated program.

Table of Contents

• A Reflection on Risky Lending Practices

• How Reverse Mortgages Offer Financial Freedom for Seniors

• Reverse Mortgage Scam Concerns vs. Facts

• Firsthand Experience With My Mother

• Beyond Myths: The Need for Informed Decisions on Reverse Mortgages

• Top FAQs

A Reflection on Risky Lending Practices

Over the years, I’ve seen many lending programs banks offer that led to countless foreclosures. Some of these included loans with no income or asset verification, leaving borrowers with no real chance of repayment. Banks relied on home equity, knowing they could foreclose and take the property when the borrower inevitably defaulted. There were also loans with negative amortization, balloon payments, and other risky products like step programs and buy-downs, which caused payments to increase faster than borrowers could manage.

These types of loans had to be regulated and, in many cases, banned altogether. Even today, HELOCs (Home Equity Lines of Credit) offered by banks come with a 10-year interest-only draw period, followed by a reset with double or triple payments. Many borrowers cannot afford these higher payments, and when the time comes, they can’t refinance or extend the loan.

Throughout my 40+ years in the mortgage industry, I’ve witnessed many lending programs that looked beneficial on paper but ultimately harmed borrowers who didn’t fully understand them. A quick Google search of Wells Fargo Bank shows you what some banks have done to borrowers in recent years.

While these programs may work for certain individuals, many lose their homes due to a lack of proper education from loan officers. But does that make the product itself a “scam”? The issue often lies with the lack of borrower education, not the product itself.

How Reverse Mortgages Offer Financial Freedom for Seniors

A reverse mortgage allows senior homeowners to stay in their homes for life without the burden of monthly mortgage payments. This benefit stands in stark contrast to many traditional lending programs. With a typical bank loan, a borrower who stays in their home for 20 or 30 years often ends up paying back two to three times the original loan amount in interest.

If senior homeowners had that kind of money on hand, they could simply put it into savings for their heirs to inherit. However, the reality is that most don’t have such funds. For those concerned about leaving an inheritance, heirs could help by making the payments or providing financial support to their elderly relatives, preserving the home’s equity.

Unfortunately, it’s rarely the case that heirs are willing or able to cover these costs. This leaves senior homeowners needing a way to live comfortably in retirement. A reverse mortgage allows them to tap into their home’s equity, either by eliminating their mortgage payments or by providing extra cash for essential expenses.

If the result is that the heirs receive less due to the senior needing funds to live on, that doesn’t make it a scam—it’s simply a necessary financial solution for many seniors.

Also See: Here’s the Real Truth About Reverse Mortgages (No BS)

Reverse Mortgage Scam Concerns vs. Facts

Scam Concern	Fact
1. It’s a deceptive trick	Reverse mortgages are legitimate, government-regulated loans, not scams—education is key.
2. You lose your home	You retain ownership; the loan is repaid when you leave, not taken by the lender.
3. Heirs get nothing	Heirs inherit any remaining equity; the loan is non-recourse, so they’re never liable for more than the home’s value.
4. Payments trap seniors	No monthly payments are required—unlike risky bank loans, offering seniors financial freedom.
5. It’s too risky	Unlike past bank products (e.g., negative amortization loans), reverse mortgages are designed to protect seniors.

Firsthand Experience With My Mother

After 30 years as a mortgage banker, my mother came to me for advice about getting a reverse mortgage. At the time, I had never originated one and didn’t know much about them. After researching how a reverse mortgage could improve her quality of life, I fully supported her decision—and she still has the reverse mortgage today.

While it means that my two siblings and I will inherit a smaller asset, her comfort and dignity are far more important than receiving her home as an inheritance. She’s using the equity in a home that she worked hard to purchase to live comfortably now. This hasn’t “put us in jeopardy”—it’s allowed her to enjoy the retirement she deserves.

If I were concerned about the inheritance, I could always contribute to her payments or supplement her income, but I don’t feel she owes us her home. It’s hers, not ours. Since getting the reverse mortgage, she’s been happier and more financially secure, with the resources she needs to live the life she wants.

Beyond Myths: The Need for Informed Decisions on Reverse Mortgages

A little education goes a long way. I apologize for being long-winded. It frustrates me to see reverse mortgages misrepresented. Worse yet, some seem to prioritize their needs over those of senior homeowners—people who worked hard to buy and pay for their homes and now need to access their equity to live comfortably.

As a banker, I urge you to reflect on the history of your industry and its lending products, especially those loans coming due now. Many borrowers are in crisis as their payments triple, and banks often do little to help. Yet, reverse mortgages get labeled as a “scam” despite being a lifeline for many seniors.

Over the past 10 years, we’ve received thousands of positive reviews from homeowners we’ve helped stay in their homes, many of whom were on the brink of foreclosure. Reverse mortgages saved their homes and allowed them to remain, giving them a chance to live with dignity. How much equity do you think heirs would have received if the bank had foreclosed on their homes? Where would those borrowers have gone?

Unlike many traditional loans, reverse mortgages allow senior homeowners to stay in their homes for life without mortgage payments. This starkly contrasts the bank loans that are now coming due, ruining people’s credit and forcing them into foreclosure when they can no longer keep up with rising payments.

Unsure If a Reverse Mortgage Is Right for You? Get a free, custom quote from America’s #1 Rated Reverse Lender, All Reverse Mortgage (A+ BBB, 5-Stars)! Call (800) 565-1722 or click here for your free quote —simple, trusted, 100% secure!

Top FAQs

Is a reverse mortgage a scam?

No, reverse mortgages are not scams. They are legitimate loans designed for seniors, but it’s essential for borrowers to fully understand how they work. Interest accrues on the loan over time and is repaid when you leave the property. However, you have the option to make payments without penalty if you want to reduce the amount of interest that accrues.

What is the catch with a reverse mortgage?

There’s no catch—reverse mortgages are straightforward loans, but educating yourself and ensuring the loan aligns with your needs is crucial. Borrowers can go years without making payments, potentially saving tens or hundreds of thousands of dollars. However, interest does accrue, and if leaving a significant inheritance is a priority, this may not be the best option. Remember, you always retain ownership of your home and can sell it anytime.

When is a reverse mortgage a good idea?

A reverse mortgage can be a great option when you plan to stay in your home long-term and need financial relief. If eliminating a current mortgage payment or receiving monthly payments from the reverse mortgage will significantly improve your quality of life, this loan could be right for you. It’s especially helpful for seniors who love their home but need extra income to cover expenses and live comfortably.

When is a reverse mortgage NOT a good idea?

A reverse mortgage may not be the best option if, even with the loan, finances will still be tight. It’s also not ideal if your home no longer suits your needs or if you plan to move in the near future, as the costs associated with a reverse mortgage can be too high for short-term use. Additionally, if preserving your home’s full equity for an heir is your priority, a reverse mortgage may not be the right choice.

What does Suze Orman say about reverse mortgages?

Suze Orman has had mixed views on reverse mortgages. Her primary concern has been with fixed-rate, lump-sum payouts for borrowers who don’t immediately need the money. We agree that borrowers should only take what they need, as this limits the interest that accrues. With a reverse mortgage line of credit, unused funds increase over time, giving you more access to money later if needed while protecting your equity if you don’t use the funds.

Reverse Mortgages: Most Common Myth on Bank Taking Your Home

ARLO recommends these helpful resources:

America's #1 Rated Reverse Lender Celebrating 20 Years of Excellence.

Have a Question About Reverse Mortgages?

Look no further. Michael G. Branson, our CEO, brings a wealth of knowledge directly to you. With a robust 45-year tenure in mortgage banking and 20 years dedicated solely to reverse mortgages, he's the expert you want on your side.

Post your question in the comments below and anticipate a personalized response from Mr. Branson himself, typically within one business day. He's here to illuminate all angles of reverse mortgages, ensuring you're equipped with the knowledge to make informed decisions. Take this opportunity to gain insights from a seasoned professional.

32 Comments on this Article

Chena M.
January 4th, 2025

I am a neighbor of a now abandoned home and property whose owner had a reverse mortgage and passed away approximately five years ago. Unfortunately, there's a relatively large reverse mortgage on the property, and upon the late owner's passing, the bank should have taken over ownership years ago. However, as of a few months ago, according to one of his surviving daughters, the property is still in the deceased homeowner's name.

The reverse mortgage far exceeds the property's revenue evaluation, so it's in a holding pattern. The daughters formally requested for HUD to take over the house per the initial reverse mortgage agreement but are still waiting for finalization.

What can we as neighbors do to accelerate the process so the property can be foreclosed and resold? The doors and windows are boarded up, and at least a few times a year squatters move in until we notice and call the police. This is a lovely neighborhood, and we'd like to see the home lived in and cared for.

Reply to Chena
- Michael Branson
  January 8th, 2025
  
  Hello Chena,
  I understand your frustration with the delays in resolving the status of the abandoned property. Typically, assuming no title issues or other unforeseen complications outside the lender's control, the foreclosure process should have been completed by now. If the loan has been transferred to HUD or remains with the lender, they should have acted to resolve the matter under normal circumstances.
  Unfortunately, there isn't much that neighbors can do to directly expedite the process. However, you could consider contacting HUD to express your concerns about the delays. If you choose to reach out, having the property address and the HUD Case Number would be helpful. The Case Number is printed on the Deed of Trust or Mortgage, which is a recorded document.
  While I cannot guarantee this will resolve the issue, HUD may take more notice if they receive correspondence from concerned neighbors. In one case I heard of, a homeowner claimed letters to their congressional representative about the financial waste to FHA/HUD on a similar abandoned property helped accelerate the process. While this is anecdotal and not guaranteed, it may be worth exploring if all else fails.
  I wish you and your neighbors the best in resolving this issue and hope the property can soon be restored to productive use.
  Reply to Michael
Bonnie C.
November 4th, 2024

My mother passed away in September 2019. She had a reverse mortgage on the home. She didn't have a will, but my brother, sister, and I are listed on her death certificate. I notified the lender and sent them the death certificate. The house has been empty for five years now. Recently, I was notified that someone else has acquired the house, and they are telling us that we need to sign papers to release the property. Is this a common practice, or are we being scammed?
Reply to Bonnie
- Michael Branson
  November 4th, 2024
  
  Hello Bonnie,
  I'm not sure what documents they are asking you to sign. Typically, if no heir took action to pay off the loan to keep or sell the property, the lender would have acquired ownership rights through a foreclosure sale by now, meaning there would be no need for you to sign anything further. I would recommend reviewing the documents carefully to ensure you're comfortable with them, and if you're uncertain, consider having an attorney review them as well.
  Since I don't know the contents of the documents, I can't speculate on their purpose, and I haven't heard of a lender reaching out to heirs for signatures five years after the fact. I'm also assuming it's the lender contacting you, but when you mention "they," it's not entirely clear if you're referring to the new owners you mentioned, which would be unusual. While I can't provide legal advice, I suggest consulting with an attorney before signing anything to ensure everything is legitimate.
  Reply to Michael
Peggy H.
October 5th, 2024

I get letters in the mail without company names stating this is my final notice to get home warranty policy that is required for my reverse mortgage. Is this policy required? My lender says I don't need it.
Reply to Peggy
- Michael Branson
  October 5th, 2024
  
  Hello Peggy,
  A home warranty is not a requirement for a reverse mortgage. The companies sending out these types of advertisements are simply trying to create a sense of urgency by using phrases like "final notice." Unfortunately, these tactics are meant to confuse homeowners, and despite their claims, it's rarely the last notice you'll receive. Rest assured, a home warranty is not required by the lender or HUD.
  That said, there may be situations where a home warranty is worth considering, especially if you're using a reverse mortgage to purchase a home with which you have no prior experience. In such cases, it might be wise to speak with your real estate agent about obtaining a home warranty. A legitimate home warranty can help protect buyers from unexpected repairs, especially for items nearing the end of their useful life in a new home. However, if you've owned your home for a while and are familiar with its condition, these warranties may not even cover issues that arise.
  You can safely toss any mail claiming a home warranty is required. Ultimately, the choice to purchase a home warranty is entirely up to you, but it is definitely not mandated by HUD or the lender.
  Reply to Michael
Jeannie B.
September 9th, 2024

Hello,

I looked up my MERS ID, and it says "inactive" from PHH Mortgage. I received a letter from them in January 2023 stating the loan was transferred to NOVAD servicing for HUD. Since then, I haven't heard anything. Recently, I saw online that it was transferred to Compulink, so I tried contacting them, but they don't return my emails. I've heard people talking about their mortgages being paid off as part of a MERS scam. Is this true? How can I find out if my loan was paid off? The loan was originally processed in 2012 under Countrywide. Could this be why no one has contacted me in over a year? How can I find out if my reverse mortgage still exists? I'm not receiving any information.

Thanks,
Jeannie
Reply to Jeannie
- Michael Branson
  September 9th, 2024
  
  Hello Jeannie,
  I am not aware of any MERS scam. After receiving your inquiry, I Googled the term, and several results appeared. I must admit, some seemed rather strange, but they've been circulating for over 10 years. If MERS had been involved in a scam, I believe the entire system would have been shut down by now. I've been a mortgage banker for many years and remember when there was no MERS. MERS was created to solve the issue where loans were sold to new lienholders, but the assignments were not always recorded with the county recorder. Additionally, some lenders went out of business or delayed filing reconveyances, leaving homeowners with old liens on their properties, which caused issues when trying to sell or refinance.
  MERS provided a database that allowed lien tracking. Even if a lender was poor at recording reconveyances or assignments, MERS ensured that old liens were removed promptly when they were no longer valid. It also offered a way to identify the current loan servicer, even when loans had been transferred multiple times without a clear paper trail. I've never heard of any scams blaming MERS for loans not being paid off or falsely marked as paid. I'm unsure how to advise you on that specific issue.
  Since you've already identified that the loan was transferred from PHH to NOVAD and then to Compulink, I recommend sending a registered letter to Compulink requesting information about the loan. Be sure to include as much information as possible, such as your HUD Case Number (found on your original paperwork) or a copy of your recorded Deed of Trust or Mortgage from the county recorder's office. Reference the Case Number, your MERS MIN (Mortgage Identification Number), your name, and the property address. If you do not receive a timely or helpful response, escalate your request to a higher level at Compulink. Also, send copies of your letters to the HUD Home Ownership Center (HOC) office that services your area. You can find their contact information here: https://www.hud.gov/program_offices/housing/sfh/sfhhocs.
  You can check public records at the county recorder's office to verify if the loan still exists. A loan doesn't just disappear - a lender must record a reconveyance to remove the lien. If the lender or HUD hasn't recorded such a document, the lien is still in effect. Persistence may be required, but if you stay on them, you'll get a response from the servicer!
  Reply to Michael
Barry K.
March 13th, 2024

There are numerous restrictions... the senior pays significantly for the reverse mortgage, and in many cases, they can lose the equity in their home over 10 to 15 years. To add insult to injury, they must cover all home expenses, such as taxes, maintenance (e.g., new roof, furnace, windows), etc. Moreover, the amount advanced by the reverse mortgage is reduced by interest deducted monthly. It may not technically be a scam, but it raises concerns.
Reply to Barry
- Michael Branson
  March 13th, 2024
  
  Hello Barry,
  Indeed, interest accrues on the loan, and if the borrower opts to live in the home without making payments for 15 years and the home's value does not increase, it is possible for borrowers to use up all their equity. However, you fail to mention that they can continue to live in the home for the rest of their lives, even after their equity is depleted. This is without making any payments, and no matter how much interest accrues, neither they nor their heirs will ever have to repay more than the home's value, regardless of how much the loan balance has increased.
  If a senior homeowner lives in the property for 15 or 20 years without making payments, and the home's value remains the same or decreases (consider the period from 2008 to 2013), their heirs can settle the loan for either 95% of the current market value or the outstanding loan balance, whichever is lower, irrespective of how much less the current value is than the amount owed. Furthermore, neither the lender nor HUD can demand any shortfall from the estate or the heirs, even if the borrower has managed to save a considerable amount by not making mortgage payments over those 20 years. Some borrowers might save $1,500 or more each month, which, if saved in a bank account with interest, could accumulate significantly, and the lender cannot claim it.
  Moreover, homeowners are responsible for taxes, insurance, and home maintenance, whether they have a reverse mortgage or not, so I need clarification on your complaint. If they prefer not to bear these costs, they always have the option to sell their home and transition to renting, potentially with a cash reserve. People choose reverse mortgages because they wish to remain in their homes, and this option facilitates that desire. Additionally, as homes have generally appreciated over the past five years (though not universally), they can build more equity.
  Finally, we have consistently stated that reverse mortgages are only suitable for some borrowers. The key is being well-informed. Borrowers must have all the necessary information to make a decision that aligns with their circumstances. We do not assert that a reverse mortgage is universally right or wrong; instead, we advocate for making an informed decision based on individual needs and goals rather than unfounded allegations.
  Reply to Michael
Kay
February 16th, 2024

My mom got an HECM reverse mortgage in 2012. She used $60,000. She was told she had equity to use for a total of $60,000 out of $130,000. The fees and interest were taken from her line of equity. We knew that fees and interest would accrue.

We thought that would be tabulated at the end of the loan as part of the payoff. We did not know they would pay those fees and interest out of her credit line themselves. We were never told that the fees and interest would sap her equity line.

Her $130,000 that we were told would grow was untrue. Her equity line dried up in 2 years because of fees and interest.

This IS a scam. I can't afford the now $280,000 (and growing) payoff. I have to sell or lose it to foreclosure. This whole thing is a lie.
Reply to Kay
- Michael Branson
  February 16th, 2024
  
  Kay,
  I can't comment on what she may have been told. I certainly cannot make any assurances about what someone may have said to your mom 11 years ago. All the printed material specifies how the foreclosure works, that the line of credit grows on the unused portion, and at what rate. She would have received an amortization schedule showing her the line of credit and the potential growth, but that growth would only be consistent while money remained in the line. Once she depleted the line (drew the funds), no more line would be available to grow. This is covered by both the lender and an impartial HUD-approved counselor.
  The reverse mortgage is the most regulated loan in existence. There are at least three sets of disclosures that the borrower receives before the loan closing. They show the fees being paid (at the onset), the funds left available after paying all costs to get the loan, and the remaining money. Mom also received a monthly statement from the start that showed the balance, the interest accruing, and the new balance each month. The interest accruing did not lower the equity line available to Mom. It would add to the balance but does not lower the line of credit amount available to the borrower. If you still have the statements, you can go back over them and review them. If not, ask the lender for copies. They should not have all 11 years available, but they will have access to a good portion of the statements. Costs to get the loan are taken out of the funds available to the borrower at the onset, but that is clearly shown in all the documentation. If you can't find your initial paperwork, you can also request copies of the documents your mom signed from the lender, and you will find all of that information.
  Finally, your mom can still stay in the home regardless of the accrued balance. Mom has been able to stay in the home for the last 11 years and has not been required to make any interest or principal payments, and it doesn't matter what the balance rises to. She will never be required to leave the home as long as she continues to live in the property and pay the taxes and insurance. When she finally must leave the home due to passing or having to move to assisted living, as the heir, you have the option of keeping the home and paying off the loan at the lower of the outstanding balance or 95% of the current market value of the home, selling the property or walking away and owing nothing regardless of what the balance is (and the lender cannot look to mom's estate to pay any deficit balance if there is one).
  Along with the numbers printed from the HUD calculator, this should have been explained to Mom at the time. You will need to find out the home's value in 11 or more years, what interest rates will do in that time, or how long the borrower may remain in the home. Some borrowers keep their loans for 15 years or more. Some for much less time. No one can tell how long a reverse mortgage borrower will keep their home. Still, one of the beauties of the loan is that for 11 years now, mom has not had to pay any mortgage or rent payments, and regardless of what values do, there can be no additional balance owed at the payoff, and any equity still belongs to mom or her heirs. Again, I cannot comment if anyone ever told Mom that she could never spend all her available funds or didn't explain fully how the distribution/disbursement of funds occurred or how that could have been misunderstood. However, saying that the whole thing is a lie is inaccurate.
  When you review the documentation, you will see that it was all there from the start. We urge borrowers to be sure they fully understand the terms of this loan and any loan before they agree to sign on the dotted line. We urge borrowers to ask questions and ask again if they aren't sure of the first answer they got or if it doesn't seem to support the documentation they received. The Loan Comparison Page and the Amortization Schedule you received would dispute the things you say you were told, so if someone told you that the fees or the interest would be handled differently than the disclosures you received at application, and then twice more before closing, it is a good idea to stop and ask questions until you are comfortable with the answer.
  If you still don't like the answer you are getting, it's not a bad idea to seek third-party assistance with a trusted advisor or even legal assistance. If you are uncomfortable reviewing the information, ask questions at the counseling session, or don't be afraid to seek assistance. This is a big decision, and you should either get the loan or not because it is the right decision for you, not because you were not sure what you were agreeing to.
  Reply to Michael
Marie N.
February 10th, 2024

A lien was placed on our home in Arizona for $52,000 without our knowledge. We found this when we tried to refinance. This is a case of elder abuse also. We are 75 & 77...
Reply to Marie
- Michael Branson
  February 10th, 2024
  
  Hello Marie,
  That's terrible. Have you been able to determine who placed the lien and what it was for? We're not able to provide legal advice but there are plenty of legal services that do specialize in free or reduced legal services for seniors.
  I was able to find this link online for elder law services offered by the state of Arizona: https://des.az.gov/legal-services. They might be able to assist you with your issue.
  I sure hope they can resolve this for you.
  Reply to Michael
Clella D.
September 26th, 2022

Is it against the law for a loan company or bank to give you a loan when you have a reverse mortgage or try to get you to have more credit through them even though you have reverse mortgage? Thank you for your reply ARLO!
Reply to Clella
- Michael Branson
  September 30th, 2022
  
  Hello Clella,
  
  There is no law I am aware of that would prevent a bank from offering you additional credit just because you have a reverse mortgage with them. There are laws against predatory lending and if the lender was aware that you could not repay the loan and offered you funds anyway with the knowledge that it would put you in financial jeopardy in the hope that they would benefit from your peril, that would be illegal. If you feel that a lender is preying on you for any reason, you can contact an attorney or perhaps free legal aid or elder abuse through the local district attorney in your area.
  Reply to Michael
Beth
August 20th, 2022

Hi Arlo,

Our had a reverse mortgage and passed away. We are now at the stage where the home is in Pre -foreclosure. The home is going up for auction at the end of the month. I received a message on the answering machine from someone telling us since we are the heirs, that the home is expected to sell for more that is owed on the reverse mortgage. They had also said as the heirs , if the home sells for more, we would be entitled to whatever was left after the loan was met. If there is any left over money on the home, How is it claimed by us? Do they send it to us, or do we have to be there at the auction? Please let me know and Thank you
Reply to Beth
- Michael Branson
  August 20th, 2022
  
  Hello Beth,
  
  I can't say for sure, but I would be a little skeptical about any messages you have received like this. I don't know that this is a scam for certain, but I would certainly do a little research before you contact anyone back from such an unsolicited call and here is why. If the home is going to sell at a foreclosure auction, the home will go to the highest bidder at the auction. The first bid will be the amount owed to the lender including all interest accrued and foreclosure costs. The lender will not (cannot by law) increase their bid once this initial bid is set. The only way it will sell for higher than this amount is if there are others there who are willing to buy the home for more than the lender's bid and they usually need to pay for the home with cash or have a loan ready to close at that time.
  
  For someone to contact you out of the blue and leave you a message that the home will probably sell for more than is owed at the foreclosure auction, the balance owed would need to be considerably less than the current value of the home and then I would recommend that you do one of two things: either find a way to pay off the loan before the sale auction as is your right then sell the home yourself and keep the equity or find an investor willing to pay you something less than the full value but over the amount owed and sell the home to them. There are many investors advertising regularly that they will buy homes for cash with no agents involved and you may find that a quick sale is in your best interest.
  
  If you are the most likely heir but do not have title to the property, you may not have either of these options and it may be too late to start working with selling the home at this time. Determining the value of the home and comparing that to the amount owed on the loan and then weighing all options is something all heirs should do immediately after their family members have passed, not within the last couple of weeks before the home is lost to foreclosure. I don't honestly know what options you may have at this time but if there is substantial equity remaining, I know I would contact a real estate attorney to see if there was any way to get a court ordered stay of the foreclosure to give me time to change the title and sell the home. I am not an attorney and I do not know if this legal option is available to you but I would certainly check if there is substantial equity remaining in the home. Otherwise, you are just waiting to see who buys the home at auction to see if there is any money left over after paying off the lender and there may be and there may not be.
  
  How to get those funds as the heir is another question for the attorney though because that would be a legal issue and would have nothing to with the reverse mortgage. The lender will only receive the amount needed to pay off what is owed plus costs from the trustee who holds the sale. The trustee will be required to remit any remaining funds over and above what is owed to the lender to whomever based on the laws in your state and I honestly cannot tell you if that means you will need to go through a probate court or what but an attorney in your area who handles such matters will be able to advise you. I would urge you to determine if there is a strong equity position in the home before that time though so you can decide what your next move should be.
  Reply to Michael
Henry l.
April 21st, 2022

Hello Arlo,

My Mother-in-law who is in her mid 80's received a foreclosure letter from Novad because she is a non-borrowing spouse. I was told that a non-borrowing spouse can still leave in the home.

Novad says they need a copy of her driver's license, Social Security card, copy of the marriage license, proof of Insurance and Taxes being paid. A death certificate for my father-in-law. Plus, they want $1500 dollars for what they say are unpaid taxes? She paid the taxes.

Is this a scam letter?
Reply to Henry
- Michael Branson
  April 21st, 2022
  
  Hello Henry
  
  I would never assume that the letter is a scam but go into it with your eyes open. Check the address with the address listed by NOVAD on their website and if it is correct, then you have the right company and you do not want to ignore any notices/requests if she is eligible for deferral.
  Remember, to be eligible for deferral, the spouse would need to have been eligible for non-borrowing spouse under HUD's current rule now, even if they were not at the time. This means that they must have been married to the borrower at the time the loan closed and living in the property. If your mother in law married after the loan closed, she is not eligible for deferral anyway and she needs to work on how she intends to pay the loan off or sell the home now and sending them the information will not help anyway.
  
  If she was married to the borrower at the time the loan closed but just was not added to the loan for some reason (i.e., was too young to be on the reverse mortgage at the time), HUD now has a solution for younger spouses that allows them to be eligible non-borrowing spouses whereby they are not borrowers on the loan but the loan is eligible for deferral when the older spouse passes.
  This means that the younger non-borrowing spouse cannot draw funds if any are left on the line of credit but they also can continue to live in the property without having to make a loan payment. The younger spouse must also pay the property taxes in a timely manner and must occupy the property as their primary residence to be eligible for the deferral, just like a borrower must to be eligible for the loan.
  
  However, if the borrower later married your mother-in-law and the reason why she is not on the loan is because her husband was not her husband when he obtained the loan, you cannot add another borrower to a reverse mortgage loan after it closes. Therefore, once NOVAD gets the documentation they are requesting, they will know if she is an eligible non-borrowing spouse or an ineligible non-borrowing spouse.
  If she is ineligible, they will inform her that the loan is now due and payable and she will be required to pay the loan in full if she wishes to remain in the property (can be done with a refinance of the loan of with other funds available to her), sell the home and move or notify NOVAD that she does not intend to do any of the above and then she would have until they foreclose on the loan until she had to vacate the property.
  Hopefully, it will just be a matter of giving them the supporting documentation to show she is eligible for deferral and that the taxes have been paid.
  Reply to Michael
Barbara S.
May 24th, 2021

I have a reverse mortgage. I received a letter saying the home warranty, secured by my lender, may expire. Does that mean I can lose my home?
Reply to Barbara
- Michael Branson
  May 24th, 2021
  
  Hello Barbara,
  
  Lenders do not secure a Home Warranty on your home. If you purchased protection, it would be your decision to either renew that policy or not when the term expires.
  I cannot say for sure, but it sounds like you received a scam notice from a company trying to sell you a service and they know that you would recognize as false if they told you that you bought the warranty, so they are claiming that the lender bought it for you.
  There is no concern about you losing your home because the lender does not require you to have a home warranty. If you think there may be any truth to the claim that the lender bought you a warranty policy, you can always contact the servicer at the number on your monthly statement, but I am very certain that this is a ploy by this company to sell you a warranty and nothing more.
  On a side note, you may want to verify the company's reputation with online reviews or with the Better Business Bureau before you even respond if you are considering it because I would be very hesitant to work with a company who used this type of marketing.
  Reply to Michael
Pauline
July 15th, 2020

Elder abuse and theft of inter generational wealth. Reputable channels such as CNN should be ashamed to air Selleck spots, but I have also actually seen them air spots for holy water. They will shill any scam.
Reply to Pauline
- Michael Branson
  July 15th, 2020
  
  Hello Pauline,
  I am sorry you feel so strongly regarding a program about which you obviously are so poorly informed. The first reverse mortgage I had ever completed after more than 30 years of mortgage banking experience was for my own mother.
  She came to me telling me she was considering it and asked me about the loan and what I thought. I had to research it since I had never worked with them in all my years in the industry at that time. It turned out to be the best thing for her.
  The reverse mortgage allowed her to remain in the home she bought, paid for, and dearly loved for an additional 12 years without having to make a house payment. All while allowing her to make the updates the home needed to make it more livable for her and gave her a monthly income she used to golf, bowl, go to the major league baseball games she so dearly loved and out to lunch and dinner with her friends - all her favorite things that she had to give up prior to that because she could no longer afford them.
  After her reverse mortgage, she updated her kitchen and bathrooms and replaced all her original 40+ year old aluminum slider windows that she could no longer slide because the glides had worn out. She got to where she felt she could not run her AC due to the cost in the hot summer months. All that changed after she closed her reverse mortgage.
  She opted for the Modified Tenure loan. It gave her a line of credit to make the upgrades she wanted to the home and a monthly payment for life of just under $1,000 per month which made all the difference to mom.
  Instead of going to the middle of each month and running out of money, she had all she needed to take her through each month-end doing all the activities she loved. Mom was no longer existing, she was LIVING!
  Does that mean that I got less money when the time came to sell mom's house?
  Yes, it did. Do I resent that fact at all? Not even a tiny bit. I helped my mom while she was still living in the home before her reverse mortgage and I could tell it bothered her no matter how much I told her it was my pleasure to do so. I did not even realize how many things did not work or what she did without until after she fixed them with her reverse mortgage.
  Mom never let on that she was giving up activities because she could no longer afford them, and she would never have let me help pay for them even if I did know. So, do I (or my brother or sister) have any regrets about her getting her reverse mortgage? Not in the slightest and I only wish she had done so earlier!
  The one thing I like about this commercial is that they do now say that the loan is not right for everyone (I do not think they always did). We have been saying this all along. If your income is such that you do not need the loan, do not get it. Keep your equity and pass it on to your heirs.
  But knowing that the options is there for people who need it is certainly not abuse or theft of any kind. If families are concerned about their generational wealth disappearing, they can establish a familial reverse mortgage on their own.
  One whereby the family funds payments to the senior homeowner who needs capital and are repaid when the senior passes. That way no fees or interest accrues. Otherwise, if you are advocating that the senior homeowner should just "suck it up" and not have any access to funds if needed because it lessens the amount future generations might receive in inheritance, we will need to respectfully agree to disagree.
  I believe the home belongs to the person who bought and paid for it and if there is any benefit to be gained from the value of the home, it ought to be to those individuals - not someone else.
  I believe anything left over for others after that is just a nice bonus but not to be expected and I live what I say because I have been through it with my mom, and I would do it again in a heartbeat.
  Reply to Michael
JEANETTE DEMARTINI
February 26th, 2019

A prospect for insurance just called me and said their Reverse Mortgage had wanted payments back each month that he was not aware of . Ever hear of a reverse mortgage that also has payments attached? Also his "principal" loan went up from $27,000 to $50,000. He has a foreclosure from this reverse mortgage company. I'm confused!
Reply to JEANETTE
- Michael Branson
  February 26th, 2019
  
  Hello Jeanette,
  
  The loan has no payments due in the loan itself so I can only guess what might be happening based solely on your comments. Especially if they are starting a foreclosure. It sounds more like he didn't pay his taxes or other property charges, they had to advance funds, and were giving him an opportunity to repay the advances in installments but that's strictly a guess. As far as the principal increasing, are you referring to the Principal Limit or the total outstanding loan balance?
  The Principal Limit grows on the unused portion of the line, but if he had $27,000 available, a jump to $50,000 would be too great an increase so I must believe you are referring to his total outstanding balance increasing. And the only thing I can guess without knowing any facts at all other than the fact that they are asking for funds returned and now talking about foreclosure is possibly again that they had to advance funds on his behalf.
  Is it possible based on his property tax amount that he got $23,000 behind in his taxes? In some parts of the country, that's only a couple years' taxes and is entirely possible while in other areas the annual taxes are much lower, and that amount could represent 50 years' or more worth of taxes, so I have no way of knowing if that's even plausible. I would try to help your prospect as he sounds confused and if he did fail to pay his taxes, he needs to work with the lender to resolve this problem before it gets to the foreclosure point.
  Reply to Michael
Stephen J.P. Ingley
April 26th, 2018

In all fairness this is a terrible deal for a veteran Senior Homeowner like myself.

Pretty sure I'd rather keep the full $180,000 Sale Price, let the Buyer pay all Closing Costs, and move to Panama to do some fishing in the Pacific every week...

It is a Hot Seller's Market here and not one home for sale in our Subdivision as of today...I have interviewed 2 Realtors, 2 Investors, and yourself in order to make the most informed decision.

Up until today I had not realized just how terrible a Reverse Mortgage really is...
Reply to Stephen
- Michael Branson
  April 26th, 2018
  
  Hi Stephen,
  
  This is why we tell folks that the loan is not for everyone. The reverse mortgage is not buying your home, but rather is intended to give you some income if your plan and desire is to stay there for the rest of your life. If you are talking about the most amount of money in your hands because you can't decide if you want to stay or go, the reverse mortgage is not the right choice. If your goal is staying in a home you love for the rest of your life and you just want some additional income or cash, it might make more sense. If your interests or goals are to head to Panama and fish, then God Bless, and I wish you the best but that is not what a reverse mortgage is meant to do -it's apples and oranges.
  
  At any rate, I certainly wish you the best and I'd love to see you send me a picture of some huge fish that you caught some day with a smile on your face and a tropical drink in one hand! Good luck and be happy. And by the way, thank you for your service!!!
  Reply to Michael
Howard
July 19th, 2017

Is it a scam to offer lender credits on a reverse mortgage purchase?
Reply to Howard
- Michael Branson
  July 19th, 2017
  
  Hello Howard,
  I don't know what you mean by scam but HUD does not allow them. The individual who made the offer either made an error and will find that he/she cannot give them to you or will have to try to get you to agree to accept them outside of closing due to the fact that they cannot let them show on the closing statement and then that is illegal and both of you would have committed mortgage fraud if you knowingly did such a thing. There are provisions that allow lenders to correct errors at closing for items that were missed that the law does not allow them to add to the closing statement that was not disclosed so I am not accusing anyone of anything, just that if you or the originator knowingly make a side agreement to provide or receive credits outside of escrow, there is a reason they can't put them through escrow and you may want to choose another originator.
  Reply to Michael
Dennis Boyer
May 2nd, 2017

NOT A SCAM. You are a bullshit artist like the president. (Small p to slam that orange headed puke)
Can someone with your financial deal sell their home which they supposedly still own? If not, it is a scam.
Reply to Dennis
- Michael Branson
  May 2nd, 2017
  
  Dennis,
  
  As a matter of fact, that answer would be absolutely YES, anyone with a reverse mortgage can sell their home at any time (and do every day). The loan has no prepayment penalty so borrowers often sell their home and move to another, just as they do with any other loan. They always own the home so they can sell it anytime they choose, just as they can with any other loan. There is no lender approval required, the homeowner follows the same procedure as they would with any other loan - they sell their home and the closing agent requests a Beneficiary's Demand for payoff at which time the loan is paid in full. Once the loan is paid in full, borrowers can choose to use a new reverse mortgage again for their next primary residence if this is their preference. In fact, we have some borrowers who have used multiple reverse mortgages to buy and sell more than one property in succession when they moved from one home to the next (never more than one home at a time though because the terms of the reverse mortgage state that it must be on the primary residence).
  
  Dennis, this information is very easily verifiable online on the HUD website by reading their information and also by looking at the sample mortgage instruments at the HUD website if you didn't want to trust us or the actual borrowers who have first-hand knowledge and have used this program and know the truth. Yet you prefer to insult, malign and make false statements at your own detriment. I could at least respect your opinion if you understood the program and just disagreed with it, but when you make accusations that just aren't true out of ignorance, you only make yourself look bad. I would strongly suggest that before making such blatantly false and incendiary statements, you should do a little more research rather than operating solely on sheer emotion and preconceived notions that just aren't true.
  Reply to Michael

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