According to the Consumer Financial Protection Bureau (CFPB) they’ve received numerous complaints from consumers dealing with reverse mortgages. Read on to learn tips for how to best deal with your reverse mortgage.
What is a Reverse Mortgage?
A reverse mortgage allows for homeowners, 62, and older, to borrow against the accrued equity in their homes. This can often help ensure that homeowners avoid home foreclosure. These types of mortgages can aid older homeowners with their financial needs during retirement. But oftentimes the borrower's family gets stuck with bearing the brunt of the reverse mortgage.
Complaints Regarding Reverse Mortgages
During the time period between Dec. 1, 2011, and Dec. 31, 2014, the CFPB looked at 1,200 reverse mortgage complaints. Dec 1., 2011 is actually the date the CFPB started receiving complaints regarding these mortgages. During this time reverse mortgage complaints only made up 1% of all received mortgage complaints.
Interestingly, though reverse mortgages are only available to homeowners 62 and older, only 42% of the received complaints were from consumers that described themselves as 62 or older. The majority of the complaints came from the younger spouse or family member of the borrower that had taken out the reverse mortgage.
3 Things to Do
Based on the complaints, the CFPB outlined three tips to follow if your loved one has taken a reverse mortgage.
1. Verify who is on the loan. Check with the mortgage servicer to ensure its loan records are accurate and that they list everyone that should be on the loan.
2. Make plans for the non-borrowing spouse. If the reverse mortgage is only in one spouse’s name, contact the loan servicer to find out of the non-borrowing spouse is able to qualify for a repayment deferral. This will allow the non-borrowing spouse to remain living in the home after the death of the borrowing spouse. If this is not possible, come up with a plan to ensure the payments can be made should the borrowing spouse die first.
3. Make sure children and heirs know the plan. The reverse mortgage should be discussed with any children or family members. Make sure that all the information is clear. If it’s not, the reverse mortgage company should be consulted for answers and available options.
Source: Housingwire.com, CFPB: 3 tips when taking a reverse mortgage, February 9, 2015