If you pass away with a reverse mortgage in place, is your spouse protected – even if he or she never signed the original loan documents? There was a time, until about two years ago, when the answer to that question was unclear, and reverse mortgages could sometimes leave surviving spouses in a tough bind, forcing them either to pay off the loan balance or sell the home. However, with changes to federal laws implemented in 2015, that danger was effectively eliminated, thanks to stronger regulations that ensured greater spousal protection.
Now there’s a growing concern among senior advocates over what seem to be subtle changes embedded in the Trump administration’s budget request for the Department of Housing and Urban Development (HUD) – changes that could potentially undo some of those protections. A small change in wording could potentially jeopardize reverse mortgage spousal protection, and two US Senators from opposite sides of the aisle have written to HUD Secretary Ben Carson asking for clarification. So says this very recent article in the New York Times, entitled “2 Senators Question Effects of a Reverse Mortgage Proposal.”
As the Times article explains, “Advocates for the elderly persuaded federal housing officials two years ago to offer more rights and protections to the spouse of a borrower who takes out a reverse mortgage and later dies. Now there is concern that a small wording change in the Trump administration’s proposed budget request for the Department of Housing and Urban Development could undo some of those protections — potentially increasing the chances that a surviving spouse who did not sign the mortgage documents could lose a home in a foreclosure.” Two Senators, Florida Republican Marco Rubio and Nevada Democrat Catherine Cortez Masto have written Secretary Carson to find out whether the apparent policy change was intentional or in error. So far HUD has not responded, reports the Times.
The article describes the reverse mortgage market, which has been around for at least three decades, as a “niche” market, with roughly one million reverse mortgage loans currently outstanding. But the future presents a far more robust picture. “Reverse mortgages,” says the article, “are viewed as crucial pieces in helping an aging population plan for retirement, and new lenders are coming into the market.” That’s because reverse mortgages allow a homeowner aged 62 or older to borrow against his or her home equity, and avoid making any monthly payments until the borrower either dies or sells the house. Adds the Times, “Many predict that with home prices rising again and a growing number of baby boomers reaching retirement age, there will be a revival in this market as the elderly look to supplement their living expenses.”
So what’s all the fuss about concerning the new law? Here’s how the New York Times describes the issue: “The language that concerns the senators and advocates for the elderly is a proposed change in the National Housing Act that says, in regard to reverse mortgages, that a mortgagor ‘shall not include the successors and assigns of the original borrower under a mortgage.’” Senators Rubio and Masto, acting on behalf of advocates for the elderly, are worried that, if interpreted rigidly, this wording might mean surviving spouses would not necessarily be allowed to remain in the home unless the entire reverse mortgage balance were paid off. The irony is made even more puzzling because there doesn’t seem to be anyone in the reverse mortgage industry advocating for a more stringent law governing spouses. According to the New York Times, “the National Reverse Mortgage Lenders Association, the industry’s primary trade group, has not pushed for any (such) regulatory changes.”
One Washington, DC lawyer quoted for the article says this may be a case of “bad drafting.” She suggests that it’s possible HUD officials never intended to change policy and that the wording choice was made in error. The problem is, she says, that bad drafting can lead to bad policy, which is why Senators Rubio and Masto want this issue clarified now, not later.
So is there an important take-away from this New York Times article? In our view there are a few facts that stand out. First, our AgingOptions radio listeners and seminar guests should know that a reverse mortgage remains a safe and viable option for senior homeowners. Second, while we can’t claim to know whether the officials at HUD are actually trying to roll back spousal protection, it’s good to know that senators representing both ends of the political spectrum are asking the right questions. These senators clearly realize that many of their constituents are the very people that reverse mortgages are designed to help. Finally, we note that the Times article uses the word “crucial” to describe the importance of reverse mortgages to the retirement plans of millions of seniors, reflecting the shrinking number of “reverse mortgage skeptics” remaining out there.
There’s only one way to find out if a reverse mortgage is right for you and that is to sit down with a thoroughly qualified professional who will answer all your questions and evaluate your particular situation. Laura Kiel of Kiel Mortgage, a frequent guest on the AgingOptions radio program, is one of the best known reverse mortgage experts in the Pacific Northwest and we recommend her with enthusiasm. If you’re ready to find out the facts about reverse mortgages, we encourage you to call Laura Kiel. And if you’re ready to get serious about retirement planning, we invite you to attend one of our free AgingOptions LifePlanning Seminars, offered at locations throughout the area. An AgingOptions LifePlan is the only retirement plan that weaves all the key elements of retirement into one seamless strategy, allowing your financial, legal, housing, medical and family plans to work together.
Find out more about this revolutionary approach to retirement planning. For a complete list of currently scheduled LifePlanning Seminars, click on this link. Then register online for the seminar of your choice, or call us during the week and we’ll gladly assist you.
(originally reported at www.nytimes.com)