The new reverse mortgage rules: Are they right for your retirement plan?
By Hook Law Center
However, one complication that has arisen is that when husbands have taken out reverse mortgages, upon their death, their wives were unable to pay off the loans, and were faced with foreclosure. As a result, the U.S. Department of Housing and Urban Development (HUD) was the defendant in a class action lawsuit filed by AARP, which alleged that HUD failed to protect the women.
Under the new rules, if one spouse takes out a reverse mortgage, and later dies, the surviving spouse can keep residing in the home without any apprehension about foreclosure provided that she or he pays the tax and insurance, and maintains the home. The new rules also state that a couple can still obtain a reverse mortgage where only one of the spouses is 62 or older. And the younger spouse’s age will determine the amount of the couple’s payout even in the event that that spouse is not on the mortgage title. In this way, the amount of the loan will be smaller.
Reverse mortgages are complex financial products, and if you are considering one, you should consult an attorney or trusted financial adviser.