Common myths
Longbridge said there are persistent — and false — beliefs that senior homeowners do not retain the title to their home after signing a reverse mortgage agreement.
“As with any mortgage, borrowers remain responsible for meeting loan obligations, like keeping current with property taxes, homeowners insurance and maintaining the property,” the company’s release stated. “The lender places a lien on the home, as with a traditional forward mortgage, which allows the loan to be repaid when it becomes due.”
Similarly, some consumers still believe their lender will take the home when they die. While foreclosures happen in these situations, inheritance is allowed, if the heirs choose to repay the loan. Importantly, heirs are never responsible for the debt owed, which can never exceed the value of the home.
“Because reverse mortgages are non-recourse loans, they will never owe more than the home is worth at the time of sale,” the company explained.
The industry as a whole continues to combat the notion that reverse mortgages are a “last resort” financing option. But Paul Fiore, vice president of sales and branch production for HighTechLending, recently told HousingWire’s Reverse Mortgage Daily that the product suite should be framed as “just another tool in your retirement belt.”
“How does it affect someone’s everyday life?” Fiore asked. “I’m showing you a five-year or 10-year plan with a reverse mortgage, and how it’s supplementing your situation, so you’re not worried about the cost of goods and other things happening around you.”
Among the other “legacy perceptions” cited by Longbridge is the idea that reverse mortgages lack consumer protections. The HECM program has a number of safeguards, including mandatory counseling and a financial assessment prior to origination, as well as limits on initial withdrawals.
The upfront counseling requirement came under scrutiny recently after the U.S. Department of Housing and Urban Development (HUD) publicly sought comments about potential improvements to the HECM and HECM Mortgage-Backed Securities (HMBS) programs. But the idea to remove counseling would be contingent on simplifying the HECM program and removing some of its less popular options, according to commentary from New View Advisors.
“Many of these legacy perceptions persist even as retirees live longer, face higher costs and rely more heavily on housing wealth as a primary financial asset,” Macerato said. “National Reverse Mortgage Day is an opportunity to encourage education and awareness around modern home equity solutions. Reverse mortgages are not the right choice for everyone, but decisions should be based on how the product works today, not on outdated assumptions.”
