mortgages are under fire once again, and this time for the fact that reverse mortgages
become payable – by next of kin -- in the event of borrower death.
“The first thing adult children should know about HECMs is that these reverse mortgages technically become due and payable when the borrower dies,” a Bankrate.com article states.
It’s a policy originators are aware of, but something that certainly should be mentioned up-front when discussing these types of loans with clients.
After all, reverse mortgages have recently come under regulator pressure due to the fact that some of the advertising hocking these loans was deemed misleading.
Paydayloans247 reported in June that the CFPB released the results of a focus group study that found many consumers were left with false impressions after viewing reverse mortgage
advertisements. After seeing the ads, many were confused about reverse mortgages being loans.
Many were also left with the impression that reverse mortgages were a government benefit, or that they would ensure consumers could stay in their homes for the rest of their lives, according to the CFPB.
And perhaps more clarity is needed when explaining what happens to these loans in the event of borrower death.
"If (the children of deceased borrowers) want to get a loan in their own name and pay off the reverse mortgage, they can," Cara Pierce of ClearPoint Credit Counseling Solutions in Fresno, California told Bankrate.com. "But if they can't and there are no other assets, like life insurance, other property or a 401(k), that they could use to pay off the loan, they will have to sell the property."