Consumer Financial
Protection Bureau
You have a reverse
mortgage:
Know your rights and responsibilities
1
About this guide
Your reverse mortgage basics .................................................................................. 3
Your reverse mortgage responsibilities
.................................................................. 3
Requirement 1: Your home must be your principal residence ....3
Requirement 2: You must pay your property charges on time ...6
Requirement 3: You must keep your home in good condition ...9
If you cannot meet your loan requirements
......................................................... 11
Default or foreclosure notices ..................................................... 11
Natural disasters ...........................................................................11
Paying back your loan
............................................................................................. 11
Selling your house
.................................................................................................... 12
What happens to your loan after you pass away
................................................ 13
If you have a co-borrower on your loan .....................................13
If a non-borrowing spouse lives in your home ..........................13
If you have heirs ............................................................................16
How to get help
........................................................................................................ 17
Glossary
..................................................................................................................... 19
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES2
Introduction
This guide is for reverse mortgage borrowers.
It provides information on:
§ Your reverse mortgage loan requirements
§ How to pay off your reverse mortgage loan
§ How moving out of your home or dying affects your reverse mortgage loan
§ What it means to default on your loan and where to nd help
§ What your heirs may need to know
Alert
Most reverse mortgages today are Home Equity Conversion
Mortgages (HECMs), which are federally insured by the U.S.
Department of Housing and Urban Development’s (HUD) Federal
Housing Administration (FHA). This guide covers typical features and
requirements for HECM reverse mortgage loans. Non-HECM reverse
mortgage loans may have different requirements and features.
At the back of this guide is a glossary with key reverse mortgage terms and
a list of organizations that provide help to reverse mortgage borrowers.
In the guide, the term “you” refers to you, the borrower, and any
other co-borrowers on the reverse mortgage loan.
3
Your reverse mortgage basics
Unlike a traditional mortgage, a reverse mortgage loan is repaid when the
borrowers no longer live in the home. Because interest and fees are added to
the loan balance each month, the amount you owe goes up—not down—over
time. As your loan balance increases, your home equity decreases.
Your reverse mortgage responsibilities
Although you do not make monthly mortgage payments with a reverse
mortgage, there are three main requirements you must meet:
1. Your home must be your principal (meaning primary) residence
2. You must pay your property charges, like property taxes and homeowners
insurance, on time
3. You must keep your home in good condition
Caution
Failure to meet these requirements may lead to default or foreclosure..
Requirement 1: Your home must be your
principal residence
Your home must be your principal residence, meaning it must be where you
spend the majority of the year. You can only have one principal residence at a
time. As Table 1 shows, with a reverse mortgage, you can only be away from
your home for a certain period of time.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES4
TABLE 1: HOW LONG YOU CAN BE AWAY FROM YOUR HOME WITH A REVERSE MORTGAGE
Length of time away Effects on your reverse mortgage
You are away for
more than two months,
but less than six
months, and there is no
co-borrower living in
the home
§ Notify your lender or servicer so that your lender
knows you continue to occupy the home as your
principal residence.
You are away for more
than six months for
non-medical reasons
and there is no co-
borrower living in
the home
§
§
Your home is no longer your principal residence and
your loan must be paid back or satised through
selling the property or deed-in-lieu of foreclosure.
Anyone living with you will have to move out unless
they are able to pay b
ack the loan.
You are away for more
than 12 consecutive
months in a healthcare
facility such as a
hospital, rehabilitation
center, nursing home,
or assisted living
facility and there is no
co-borrower living in
the home
§
§
Your home is no longer your principal residence and
your loan must be paid back or satised through
selling the property or deed-in-lieu of foreclosure.
Anyone living with you will have to move out unless
they are able to pay back the loan or qualify as an
Eligible Non-Borrowing Spouse.
There is a co-borrower
in the home and you
permanently move for
any reason
The co-borrower may continue to live in the home
and receive loan payments, so long as they continue
to fulll the reverse mortgage loan requirements.
5
I was asked to certify that I occupy my home. What is this? What if I
forgot to respond?
Your lender or servicer will require you to certify each year that your home is
your principal residence. Usually this is done through a postcard or other
notice sent by mail at the same time each year. If your spouse is designated
as an “Eligible Non-Borrowing Spouse” in the loan documents, you will also
need to certify that you are still married and that your spouse lives in the home
as their principal residence. To be an ‘Eligible Non-Borrowing Spouse’ means
that your spouse is not a co-borrower, but qualies under HUD’s rules to stay in
the home after you move into a healthcare facility for more than 12 consecutive
months or pass away.
It is important that you sign and return your annual occupancy
certication immediately.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES6
Requirement 2: You must pay your property charges
on time
Property charges are fees you must pay under the reverse mortgage loan,
which can include:
§ Property taxes and homeowners insurance
§ Flood insurance premiums
§ Ground rent, condominium fees, planned unit development fees, or
homeowners’ association fees
§ Any other special assessments
Paying your property charges
§ For loans made before April 27, 2015: at the time the loan documents
were signed, you could have requested that your lender or servicer pay the
property taxes and homeowners insurance from the reverse mortgage loan
funds, but you were not required to do so. Generally, borrowers need to
budget each year to make sure the taxes and insurance are paid on time.
§ For loans made after April 27, 2015: lenders evaluate your ability to pay
future property taxes and homeowners insurance when making the loan. As
shown in Table 2, your lender may require you to set aside loan proceeds to
pay future property taxes and homeowners insurance.
Caution
The money set aside to pay for your property taxes and homeowners
insurance will not cover other charges like condominium fees,
homeowners’ association fees, and ground rent. You are responsible
for paying these other property charges.
7
TABLE 2: PAYING PROPERTY CHARGES FOR LOANS AFTER APRIL 27, 2015
Lender's evaluation Who pays the property taxes & homeowners insurance
If your lender determined
that you had enough
money to pay future
property taxes and
homeowners insurance
You can choose to:
§ Pay your property charges directly, or
§ Have your servicer pay your charges by using
money from your reverse mortgage funds.
If your lender determined
that you need to “set
aside” a portion of your
loan proceeds as a
reserve to pay your
property taxes and
homeowners insurance
Your lender will choose to:
§ Pay your property taxes and homeowners insurance
directly from the reserve, or
§ Send you the money so that you can make
these payments.
§ If you are unsure if loan money was set aside, check your monthly
account statement or contact your lender or servicer.
§ If the reserve can no longer cover your property taxes or homeowners
insurance, your lender or servicer will tell you.
Caution
Unpaid property charges could put your reverse mortgage loan in
default. If you miss a payment or know that you will miss a payment,
contact your lender or servicer immediately. They may pay your
property charges by using money from your monthly loan payout or,
if you have one, your line of credit. If there is not enough money to
cover the missed charges, your lender or servicer may advance the
funds and you will be required to pay them back.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES8
Managing your property taxes
Here are some ways you can manage your property taxes.
§ You may be eligible to lower your tax payments if your state offers a tax
relief program for older homeowners. If your state has a senior property
tax exemption, you may need to apply to receive the benet. Many state
programs require you to apply shortly after the tax bill is issued. To learn
more, contact your local tax collector.
§ It is important to tell your lender or servicer if you are paying your property
taxes in installments. You do not want them to mistakenly believe that you
missed a payment.
§ If your lender wrongly determines that your loan is in default for unpaid
property taxes, contact your lender or servicer immediately. Be ready to
show proof that you have paid your property taxes.
Failure to pay property taxes
If your loan falls into default due to unpaid property charges, immediately talk
to your lender or servicer. You can ask for help from a HUD-approved housing
counseling agency or an attorney.
After you default, you may be able to rehabilitate the loan through a repayment
plan or an “at-risk extension.” To qualify for an at-risk extension, you must be at
least 80 years old and experiencing critical circumstances, such as a long-term
disability, terminal illness, or a unique need to stay in the property. You may
request to renew the at-risk extension every year with proof of your need.
9
Requirement 3: You must keep your home in
good condition
When you applied for your reverse mortgage loan, your lender evaluated
whether your home met HUD‘s property requirements.
Now that you have the reverse mortgage loan, you must keep your home in
good condition. Your lender or servicer may inspect your home’s condition if
they give you notice and specify the purpose of the inspection. They also may
tell you to make repairs.
How long do I have to make required repairs?
You generally have 60 days to start repairs from the day your lender or servicer
noties you. Failure to do so could lead to default or foreclosure.
What if I cannot afford to make required repairs?
Reach out to your local Area Agency on Aging (AAA) to nd assistance
programs that may be able to help you pay for repairs. To nd the nearest AAA,
call (800) 677-1116 or visit eldercare.acl.gov.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES10
Caution
If you need to hire a contractor to perform repairs on your house, you
may want to:
§ Explore and compare your options. Get estimates from several
contractors on the costs of repairs.
§ Ask people you trust for referrals.
§ Check if a contractor is licensed through your state’s contractors’
licensing board.
§ Have a lawyer review the contract of work.
§ Read and understand the contract before you sign it. Make sure written
contracts match any verbal promises made.
§ Beware of contractors going door-to-door. Do not feel pressured into
making a decision right away.
11
If you cannot meet the
loan requirements
Default or foreclosure notices
If you receive a default or foreclosure notice, immediately contact your
servicer to learn why. Unless steps are taken to x the default, you may lose
your home to foreclosure. Seek help from an attorney or a HUD-approved
default housing counseling agency. Both can explain what options you have
to prevent foreclosure.
Natural disasters
After a natural disaster, you may experience damage to your home, unexpected
expenses, or a sudden loss of income. All these things may make it difcult for
you to meet your reverse mortgage loan obligations. To nd help, read the
guide, Your reverse mortgage after a natural disaster, at cfpb.gov/prepare.
Paying back your loan
Unless there is a co-borrower living in the home, you must typically repay the
loan when you no longer live in the home. You may need to pay it back sooner
if you fail to meet the requirements of the loan.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES12
Selling your house
If you decide to sell your home while you have a reverse mortgage loan, you
will have to pay back the money borrowed, plus interest and fees. As shown in
Table 3, the amount you receive from the sale of your home will determine how
the loan is paid back.
TABLE 3: HOW YOUR REVERSE MORTGAGE IS PAID IF YOU SELL YOUR HOME
Your home Money from the sale
You sell your
home for at least
the loan balance
§
§
The loan is fully paid back.
You get to keep whatever money is left after paying
back the loan.
You sell your
home for at least
the appraised
market value
§
§
The money from the sale pays off the outstanding
loan balance.
Your mortgage insurance will pay any remaining balance
if the sale does not cover the amount
you owe.
Your reverse
mortgage loan is
in default and you
have received a
notice that the
loan is “due
and payable”
§
§
§
You may sell your home for 95 percent of its appraised
value or the amount owed on the loan, whichever is less.
The money from the sale will go towards paying the
outstanding loan balance.
Your mortgage insurance will pay any remaining balance
if the sale does not cover the loan balance.
13
What happens to your loan after
you pass away
Unless there is a co-borrower living in the home, when you pass away, the
loan has to be paid back. As described below, when it must be paid back
is complicated.
If you have a co-borrower on your loan
After a borrower passes away, any co-borrower on the loan may continue to
receive the benets of the reverse mortgage loan and may stay in the home as
long as they continue to fulll the loan obligations.
T
ip
It is a good idea to check with your lender or servicer to make sure
your loan records are correct. Conrm your co-borrower is listed on
the loan.
If a non-borrowing spouse lives in your home
Your non-borrowing spouse may stay in the home if they pay off the loan.
They may also be able to stay in the home without paying off the loan,
depending on when the loan was originated (meaning when it was taken out)
and whether they qualify as an Eligible Non-Borrowing Spouse under HUD’s
rules. The process may be difcult. Your non-borrowing spouse may want to
get help from an attorney or a HUD-approved housing counseling agency.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES14
For reverse mortgages originated on or after August 4, 2014
Your lender or servicer will determine if your non-borrowing spouse qualies
to stay in the home after you, the borrower, move into a healthcare facility for
more than 12 consecutive months or pass away (called a “deferral period”). To
qualify as an Eligible Non-Borrowing Spouse, your spouse must:
§ Have been married to you at the time the loan documents were signed, and
stay married to you up until your death. For couples who were unable to
be legally married based on gender at the time the reverse mortgage loan
was made, they must show that they were legally married by the time of the
borrower’s death.
§ Have been identied in the loan documents as a non-borrowing spouse.
§ Have lived, and continue to live, in the home as their principal residence even
after you move into a healthcare facility for more than 12 consecutive months
or pass away.
§ Continue to meet the loan requirements and make sure the loan does not
become due and payable for any other reason.
For reverse mortgages originated before August 4, 2014
As explained in more detail below, after you, the borrower, move into a
healthcare facility for more than more than 12 consecutive months or pass
away, your lender or servicer can choose to either:
§ Foreclose on the home, or
§ Enter a process called “Mortgage Optional Election (MOE) Assignment” that
allows an Eligible Non-Borrowing Spouse to stay in the home.
15
Foreclosure
If your lender or servicer decides to foreclose on your home or nds that your
non-borrowing spouse does not qualify for MOE Assignment, they must begin
foreclosure proceedings within six months of your death. If your non-borrowing
spouse is actively trying to sell the property or satisfy the debt in some other way,
they may request a delay of the foreclosure for up to 180 days.
T
ip
If your non-borrowing spouse receives a foreclosure notice, they should
take immediate action and not ignore it.
M
ortgage Optional Election (MOE) Assignment
If your lender or servicer decides not to foreclose and instead enters the MOE
Assignment process, to qualify as an Eligible Non-Borrowing Spouse, your
spouse must:
§ Have been married to you at the time the loan documents were signed and
remain married to you in situations in which you move into a healthcare
facility for more than 12 consecutive months, or remain married up until your
death. For couples who were unable to be legally married based on gender
at the time the reverse mortgage loan was taken out, they must show that
they were legally married by the time of the borrower’s death.
§ Have lived in the home since the beginning of the loan, and continue to live
in the home as their principal residence ever after you move into a healthcare
facility for more than 12 consecutive months or pass away.
§ Provide their Social Security number or Tax Identication Number.
§ Agree that they will no longer receive any payments from the reverse
mortgage loan.
§ Continue to meet all loan obligations, including paying property taxes and
homeowners insurance.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES16
Tip
Consider seeking legal advice if you believe your spouse should be
on the loan. If your spouse is not on the loan, talk to a lawyer about
transferring the property to your spouse when you pass away.
If you have heirs
If your heirs want to keep your home after you and your spouse pass away,
they will have to repay either the full loan balance or 95 percent of the
home’s appraised value – whichever is less.
Prepare any non-borrowing family members living in the home by deciding
together what they will do after you pass away.
17
How to get help
If you’re having trouble with your reverse mortgage, here’s what you can do to
get ahead:
§ As a borrower, you have a right to request information from or dispute any
errors with your lender or servicer. To learn more, visit consumernance.gov/
askcfpb/1855.
§ Consult an attorney. If you need help nding an attorney, contact your local
or state bar association. You may qualify for free legal services. To nd a
legal aid ofce, visit lsc.gov.
§ Talk to a housing counselor. HUD-approved housing counseling agencies
offer free or low-cost expert assistance. You can nd a housing counseling
agency by visiting hud.gov or calling (800) 569-4287.
§ Reach out to Area Agencies on Aging (AAA) to nd state and local
assistance programs that may be able to help you pay for property charges
or needed home repairs. To nd the nearest AAA, call (800) 677-1116 or visit
eldercare.acl.gov.
§ Submit a complaint with the CFPB if you are having problems with your
lender or servicer by visiting consumernance.gov or calling toll-free
(855) 411-CFPB (2372).
§ Find more information on reverse mortgage issues at consumernance.gov/
reversemortgage.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES18
19
Glossary
DEFINED TERM DEFINITION
Appraisal A written document that shows an opinion of how
much a property is worth. It describes what makes the
property valuable and may show how it compares to
other properties in the neighborhood.
Co-borrower A person, usually the borrower’s spouse or partner, who
also signs the reverse mortgage loan note and who is
equally responsible for fullling all the loan obligations
and who also receives the benets from the loan.
Deed-in-lieu of
foreclosure
An arrangement where the borrower voluntarily turns
over ownership of the home to the lender to avoid the
foreclosure process.
Default The failur
e to meet the loan requirements included in
the reverse mortgage. For example, the requirements
of a Home Equity Conversion Mortgage (HECM) loan
include occupying the home as the principal residence,
keeping the home in good repair, and paying the
property charges on time. A borrower’s failure to fulll
these obligations would cause the loan to fall into
default and may lead to foreclosure.
Eligible
Non-Borrowing
Spouse
A borrower’s spouse who is not a co-borrower, but
qualies under HUD’s rules to stay in the home after the
borrower moves into a healthcare facility for more than
12 consecutive months or p
asses away.
Equity The amount the property is currently worth, minus
the amount owed on any existing mortgages on
the property.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES20
DEFINED TERM DEFINITION
Federal Housing
Administration
(FHA)
The federal agency that insures HECMs, the most
common type of reverse mortgage loan. FHA is
part of the U.S. Department of Housing and Urban
Development (HUD).
Foreclosure
The process where the lender takes back property
because the borrower no longer fullls the obligations
of the reverse mortgage loan. Foreclosure processes
differ by state.
Home Equity
Conversion
Mortgage
(HECM)
The most common type of reverse mortgage today.
One way they differ from private reverse mortgages
(sometimes called “proprietary” reverse mortgages)
is th
at HECMs are federally insured by the Federal
Housing Administration (FHA).
Homeowners
Insurance
Pays for losses and damage to the property if
something unexpected happens, like a re or burglary.
Standard homeowners insurance doesn’t cover damage
from earthquakes or oods, but it may be possible
to add this coverage. Homeowners insurance is also
sometimes referred to as "hazard insurance." Borrowers
with a HECM loan are required to maintain homeowners
insurance in addition to the mortgage insurance that is
also required with a reverse mortgage loan.
HUD-Approved
Housing
Counseling
Agency
An org
anization with housing counselors who are
approved by HUD. Borrowers taking out a HECM
reverse mortgage loan must receive counseling from a
HUD-approved reverse mortgage counseling agency
before receiving the loan.
21
DEFINED TERM DEFINITION
Lender
The nancial institution that loaned money to
the borrower.
Loss Mitigation
The steps mortgage servicers take to work with a
borrower to avoid foreclosure. Loss mitigation refers
to a servicer’s responsibility to reduce or “mitigate” the
loss to the investor that can come from a foreclosure.
Certain loss mitigation options may help a borrower
stay in their home. Other options may help a borrower
leave their home without going through foreclosure.
Loss mitigation options for reverse mortgage
borrowers may include a deed-in-lieu of foreclosure or
a rep
ayment plan.
Maximum Claim
Amount
The lesser of the appraised value of the home, the sale
price of the home being purchased, or the maximum
limit HUD will insure. The maximum claim amount is
one factor used to calculate how much a homeowner
can borrow with a reverse mortgage loan.
Mortgage
Insurance Premium
An initial and annual amount charged by the lender
and paid to the Federal Housing Administration (FHA).
Mortgage insurance is required in addition to the
homeowners insurance the borrower must maintain.
Non-Borrowing
Spouse
A borrower’s spouse who is not a co-borrower on the
reverse mortgage loan.
Orig
ination Fees
A one-time upfront fee that the lender charges
the borrower for making the loan. These fees are
limited by the maximum claim amount and may not
exceed $6,000.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES22
DEFINED TERM DEFINITION
Principal Limit
The amount of money the borrower can borrow with a
reverse mortgage loan. The principal limit for a HECM
is calculated using the age of the youngest borrower or
Eligible Non-Borrowing Spouse, the interest rate on the
loan, and the maximum claim amount. The principal limit
generally will increase each month, possibly making
additional funds available over time for borrowers with
adjustable rate HECMs, but not xed-rate HECMs. In
general, loans with older borrowers, higher-priced
homes, and lower interest rates will have higher
principa
l limits than loans with younger borrowers,
lower-priced homes, and higher interest rates.
Principal
Residence
The property where the borrower, and if applicable,
the non-borrowing spouse, maintain their permanent
home and where they typically spend the majority of
the year. A borrower may only have one principal
residence at a time.
Proprietary
Reverse
Mortgage
Reverse mortgage loans that are not insured by the
federal government and are typically designed for
borrowers with higher home values than those insured
by HUD.
To learn more about reverse mortgages, visit consumernance.gov/
reversemortgage.
23
About the Consumer Financial
Protection Bureau (CFPB)
The Consumer Financial Protection Bureau (CFPB) is a 21st century
agency that helps consumer nance markets work by making rules
more effective, by consistently and fairly enforcing those rules,
and by empowering consumers to take more control over their
economic lives.
The CFPB Ofce for Older Americans develops initiatives, tools,
and resources to help protect older consumers from nancial
harm and help older consumers make sound nancial decisions
as they age.
For more information about the CFPB, visit consumernance.gov.
YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RIGHTS AND RESPONSIBILITIES24
Notes
