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Are Seniors Who Take Out a HECM Reverse Mortgage at Risk of Losing Their Homes?
Are Seniors Who Take Out a HECM Reverse Mortgage at Risk of Losing Their Homes?

HECM borrowers retain legal ownership of their homes, in the same way as those who take a standard mortgage. In both cases, the only risks are those associated with borrower failure to meet their obligations under the mortgage contract, which means that the risk is entirely under their control.

While borrowers under a reverse mortgage contract have no obligation to make mortgage payments, they are obliged to pay their property taxes, keep their homeowners insurance current, and maintain their property. Failure to comply with these requirements puts them in default, and the lender (with FHA’s permission) can institute foreclosure proceedings that would lead eventually to their 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taxes, as far as we have been able to determine, there has been only one eviction ordered, and that was quickly rescinded.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 for borrowers who meet their obligations.

There is a risk to persons living with a HECM borrower but not covered by the HECM contract, who can be and in some cases have been evicted following the borrower’s death. 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.

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.