Reverse Mortgage: What the AARP Suit Means for You
Seniors who took reverse mortgages are being pushed into foreclosure by HUD, according to a lawsuit filed by the AARP. Are all seniors who took a reverse mortgage at risk? No, only those who decided to put only one spouse on the reverse mortgage.
Why would a couple decide to leave a spouse off the reverse mortgage? Peter Bell, president of CEO of the National Reverse Mortgage Loan Association, explained that there are two common reasons a spouse is left off a reverse mortgage deal:
1. One spouse is 62 and the other is younger than 62. In order to qualify for a reverse mortgage the younger spouse would have to quit-claim the deed over to the older spouse. All parties to a reverse mortgage must be 62 or older.
One spouse is considerably older than the other spouse. For example one spouse is 78 and the younger spouse is 68. To get the most cash out of the house the couple decides to quit claim the deed over to the older spouse.
When a couple does this, the younger spouse will have no rights to the house when the older spouse dies unless they decide to pay off the existing reverse mortgage in full. HUD made the rules for payoff more difficult in 2008 as part of an administrative change, Peter Bell said.