Are Seniors Getting the Right Reverse Mortgage Information?

Lately, reverse mortgages have been getting some negative media attention. This is because, as of last year, an estimated 30,000 reverse mortgages have fallen into default. This means that around 5% of borrowers are at risk of losing their homes unless they can get their loans back into good standing. While the number of actual foreclosures is unknown--and likely very small--, this threat is scaring some seniors away from reverse mortgages.

Are Seniors Suffering Due to a Lack of Reverse Mortgage Information?

In the past several years, there has been a rise in reverse mortgage defaults. While reverse mortgages eliminate seniors’ mortgage payments, borrowers are obligated to keep up with their insurance payments and property taxes. Seniors must also maintain the structural integrity of their home and keep the home from falling into disrepair. However, it is usually taxes and insurance payments that get seniors into the most trouble. If these expenses go unpaid, the Federal Housing Administration (FHA) will label the loan as being in “technical” default. If the loan is not brought out of default, lenders have the right to foreclose on the home and eventually evict the homeowners.

There are two possible reasons for seniors defaulting on their loans. Either they cannot afford to make their insurance and tax payments, or seniors are not getting the reverse mortgage information they need. In many cases, it is probably a combination of the two reasons. Perhaps seniors are accepting loans that they cannot realistically afford to maintain. Either that, or seniors are getting reverse mortgages without fully understanding the importance of keeping up with their insurance and property taxes. In the haste to get a reverse mortgage, it is clear that some seniors are not getting the necessary reverse mortgage information.

What Reverse Mortgage Information Do Seniors Need to Know Before Getting a Loan?

Before pursuing a reverse mortgage, seniors should do some research on these loans. Reverse mortgage information is widely available through several government agencies including the U.S. Department of Housing and Urban Development (HUD) and FHA. Many senior protection groups, like AARP, the National Council on Aging and the Administration on Aging, also work hard to provide seniors with unbiased reverse mortgage information . To make an informed borrowing decision, seniors should begin educating themselves before even beginning the loan process.

Lenders are another great source of reverse mortgage information . Before seniors really begin considering a loan, they need to determine whether they can afford to keep up with the necessary expenses. When speaking with their lender, seniors should discuss whether their loan proceeds will enable them to pay their property taxes and homeowners insurance.

To further protect seniors, borrowers are also required to complete housing counseling in order to qualify for a reverse mortgage. During this session, counselors will discuss the senior’s options, the loan process and what is expected of them after closing the loan. The fact is there is no shortage of information available. Seniors simply need to take their time evaluating their finances and educating themselves before making such a huge financial commitment.