Consumer Protections and Your Rights:

Reverse mortgages come with several consumer protections to safeguard homeowners. Understanding these protections can help ensure a safe and informed decision-making process.

Non-Recourse Feature

Reverse mortgages are "non-recourse" loans. This means the homeowner or their heirs will never owe more than the home's value when the loan becomes due. Even if the balance of the reverse mortgage exceeds the home's value, the additional amount is not owed by the homeowner or their heirs.

Mandatory Counseling

Before getting a Home Equity Conversion Mortgage (HECM), which is the most common type of reverse mortgage, homeowners are required to attend a counseling session with a HUD-approved counselor. The aim is to ensure that the homeowner fully understands the product, its costs, and its implications. This session is an essential part of the process and serves as a key consumer protection measure.

Cooling Off Period

After the counseling session, there is a mandatory "cooling off" period before the loan process can continue. This gives the homeowner time to consider the information provided during the counseling session, discuss it with family or advisors, and decide whether to proceed.

Protections for Non-Borrowing Spouses

For HECMs originated after August 4, 2014, there are protections in place for non-borrowing spouses. If the borrowing spouse passes away or moves out of the home permanently, the non-borrowing spouse can continue to live in the home as long as they meet certain criteria, such as paying property taxes and homeowner's insurance.

Occupancy Requirements

A reverse mortgage requires the borrower to live in the home as their primary residence. If the homeowner moves out (for example, to a full-time care facility) for more than 12 consecutive months, the loan becomes due and payable. This can limit flexibility if the homeowner's health or living situation changes.