Is There Any Risk of Losing My Home by Taking a HECM Reverse Mortgage?

In a word, yes, there is a risk, but the risk is entirely under your control.

You have obligations under a reverse mortgage contract. You must pay your property taxes, keep your homeowners insurance current, and maintain your property. Failure to comply with these requirements puts you in default, and the lender (with FHA’s permission) can institute foreclosure proceedings that would lead eventually to your eviction.

To date, the danger of eviction appears hypothetical. No one inspects HECM properties after the contract is finalized. While some HECM borrowers are in default on their property taxes, as far as we have been able to determine, there has been only one eviction ordered, and that was quickly rescinded. While there is always a first time, there is zero risk if you meet your obligations as a homeowner, which you should do in your own interest whether you have a reverse mortgage or not.

You should be aware that there have been evictions following the death of the borrower. Anyone living with a HECM borrower who is not part of the HECM contract is evicted when the senior covered by the contract dies. These have been mainly younger spouses and boarders. Such cases have been much publicized, in some cases sensationalized, by media that paint a picture of Government putting innocent people out on the street. While these people may have been innocents, they were not HECM borrowers.

HECM borrowers who have others living with them who are not covered by the HECM contract have a moral obligation to inform those persons of the risk they bear. But this is not a risk to the HECM borrowers themselves.

In sum, all the risks associated with a HECM reverse mortgage are entirely under the control of the borrower.

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