Family Matters: My Grandma’s Reverse Mortgage

During my time reporting for Reverse Mortgage Daily, I’ve talked to countless brokers, lenders, counselors, and others in the industry to gain knowledge of reverse mortgages—what they are and whom they impact. Even though I’ve heard numerous times about the involvement of family and the complexities that involvement can present, it took witnessing the dynamics of my own family’s experience to learn how complicated matters can get.

On a Sunday afternoon, two weeks before Christmas, I went to my grandma’s house for a holiday luncheon. My grandmother and aunt (who lives with my grandmother) had just finished preparing our meal, and we were sitting around the kitchen table.

“What is it that you write about again?” my grandma asked about my relatively new job.

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I explained that I wrote for Reverse Mortgage Daily.

“Oh, reverse mortgages, Robert Wagner is always trying to get your grandma to get one of those, hm, Mom?” my aunt said.

“A reverse mortgage?” my grandma looked up from her spaghetti. “I got one of those.”

I leaned back in my chair as my aunt processed this piece of information. “What? I thought you just had a line of credit!” she protested.

Yes, Grandma does have a line of credit, but not a traditional HELOC like my aunt had figured.

“It’s great. I don’t need to use it all the time, just once in a while. Like for Christmas gifts for [the grandkids],” my grandma said. “[My sister] got a lump sum reverse mortgage, I think, but I don’t need all that money.”

Why exactly my aunt reacted the way she did isn’t exactly clear and it wasn’t something I wanted to bring up at the dinner table right then.

But a couple of weeks later when I was visiting my family back home in Pennsylvania for Christmas, I asked my dad how he felt about it. His reaction was more neutral, or even positive: it’s her home equity, and it’s hers to use as she sees fit.

Back when I had first heard about reverse mortgages, the concept of not being able to leave the home to heirs seemed outrageous, but my dad’s right—it’s not like children are entitled to an inheritance.

As for my aunt, I’m not sure if she understands what exactly my grandmother’s reverse mortgage means for her. Does my aunt know that once my grandmother leaves the house, she won’t be able to live there, unless she can pay back the loan?

It just goes to show: when a borrower takes out a reverse mortgage, there’s often a ripple-effect for the entire family.

My family’s story seems to be a perfect case study for reverse mortgages, featuring the satisfied borrower, the dissenting adult child, and the supportive adult child.

Even though it is ultimately the homeowner(s)’s decision to take out the loan, this choice can affect multiple other people. But how is the industry supposed to handle this? Should everyone living with the borrower be required to get counseling, or does that overstep boundaries? True, non-borrowing spouses and other residents are supposed to sign a form that they’re aware they won’t be allowed to assume the reverse mortgage upon the borrower’s death, and that the loan will become due and payable upon the borrower’s death. But this doesn’t necessarily resolve the problems that could arise.

There’s no question that this can be a very complicated issue, and at the same time… there doesn’t appear to be an easy answer.

In a perfect world, family members of reverse mortgage borrowers should also have access to education on the loan and its implications. In the long run, however, it is the borrower’s decision to make.

While I understand my aunt’s point of view, a reverse mortgage’s benefits are intended for the borrower—not necessarily for the borrower’s friends or family. In my family’s particular situation, my grandmother is happy with her decision, and at the end of the day, that’s what matters.

Written by Alyssa Gerace

This edition of RMD Report is brought to you by Landmark, a leading national appraisal management and compliance company serving the reverse mortgage lending industry.

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  • Why are you saying that the home can’t be left to their heirs? Of course it can, they can either sell it and keep what is left or refinance the house with a regular mortgage and keep the house. The statement you made is completely inaccurate!!

  • Nice story, Alyssa!  It really does illustrate a lot of the issues that arise with families.

    I would point out that family members do have access to counseling if they want it — anyone who wants counseling (and can pay for it) is free to have their own session with a reverse mortgage counselor, whether they are required to do so or not.  It would have been good if your aunt had been offered that option, since she does live in the home, even though the final decision properly belongs with your grandmother.

    • rmcounselor,

      The aunt knew a LOC was on the property.  Does it matter if it was a HELOC or a HECM?  Both are mortgages.

      The aunt could have called an originator for free and gotten the same information as you would have given her.  If the aunt is going to pay a fee, the better choice would be an elder law attorney.  For the fee what insight would counseling provide?

      It might have helped if you could have confirmed her fears, but how could you tell her if the grandmother had taken counseling or completed a HECM.  Even you cannot do that LEGALLY.

      • Well, yes, it does matter that it’s a HECM.  If it were a standard HELOC, the aunt may have been assuming that payments were being made, and that the loan would not eventually consume the entire value of the property.

        My point about counseling was simply in response to Alyssa’s comment that “in a perfect
        world” education would be available to family members — I wanted her, and RMD readers, to be aware that in fact education IS available.  The value of the counselor is in the fact that they have no financial interest in the transaction, combined with their knowledge of the product, and their knowledge of other options.  The counselor could, for instance, have explained what the options might be when the homeowner died, given her some idea what the loan balance might be at that time, and helped her explore what her own options for housing might be at that point, if it were not feasible for her to stay in the home.  An elderlaw attorney would likely not have been able to do any of those things, and would have been a lot more expensive than a counselor.  I’m actually not sure what you think the attorney would have been able to offer in this situation.

        As a counselor, I would never be in the position of telling someone what the homeowner was doing, unless the homeowner asked me to do that.  However, there is a great deal that I could do to educate the aunt so that she would have a realistic idea of how the loan works and what to expect in the future.

      • The_Critic,

        Why would anyone ASSUME that a HELOC is being paid DOWN.  Yes, payments are being made if the loan is performing but it is revolving credit just like a HECM.  Many HELOC borrowers use the LOC to make the HELOC payments and many only make interest payments.

        How is a HECM any different from a nonrecourse HELOC?  What does the balance due on the house have to do with the aunt?  You are ASSUMING she has some subsequent contingent ownership in the home falling the passing of the grandmother.  Maybe that is true now but not when the grandmother dies.  Who can tell any of that from the article?  

        How could you give the aunt any idea about what the balance due was?  Here you are ASSUMING that she has that information available.

        The issue for the aunt is not a debt issue otherwise she would know about the HECM.  Her problem seems to be one of needing a permanent or somewhat permanent living situation.  If she wants to have some ideas on how to work with the grandmother on “equity” issues, such as inheritance, trust, life tenancy, and other equity ideas, she needs the advice of someone who knows that realm, not someone who understands HECMs.

        There is no reason for someone who is not a potential buyer to pay a HECM counselor for anything.  A friendly originator will do all of that for free.

  • Great article.  I build up the value of counseling to all of my prospects and their families.  And I do think it’s a great value to them.  I’m working with a woman now whose husband took her off title 3 years ago to do a reverse mortgage.  He died intestate this past year, and BOA wouldn’t allow her to have information about the mortgage until she was put back on title.  Which she did immediately.  Unfortunately, she is now left in a horrible situation that will cost her a lot of money.  I asked if she was involved in the counseling when her husband participated.  Her answer was that the loan officer came to the house and rushed them through everything.  She doesn’t remember any counseling.  Just an example of how these things can turn out.  Again, thanks for a great article.

    •   “I’m working with a woman now whose husband took her off title 3 years ago to do a reverse mortgage.”  If this is what SHE is asserting she needs to be seeing an attorney, not YOU.  Even if she actually signed the change in title, she could have been legally coerced.

      One has to be concerned about the statute of limitations.  She needs to understand her legal rights under state law.  If you have the least bit of care for your prospect….  She needs to know her rights.

  • I too always encourage to bring family members into the process. I must say the majority of the time that is welcomed advice. However, there has been the rare occassion that the borrower wants to keep their financial affairs private from one person or another.  I feel that has to be respected.  Could this had been the case with your Aunt?  Your father, based on your article seemed to be fully aware of what was going on.

    Yes, Alyssa there is a resident form that is supposed to be signed when a non-borrower is living in the home. More reason I see to meet with the client face to face.  The heirs to the home do have options when the loan becomes due and payable.  These points are always good to over with the borrower and pointed out in their documents to share with responsible family members.

    All in All good article.  Thank you!

    • Therese,

       

      Here is the ethical dilemma.  If the grandmother does not
      want the aunt to know, how can the originator violate that position by giving
      the acknowledgment form to the resident?  What if the grandmother
      represented that the resident is a three month visitor every year or so, what
      is the originator supposed to do?  It is not our job to ask the resident
      about the situation!!!

       

      The aunt knew there was a LOC in place.  What does it matter
      if it is a HELOC or a HECM?  I don’t get it.  And, no, I disagree
      that the father knew about the HECM.

       

      It is hard to believe that so many in this thread have been drawn
      into the HECM versus HELOC difference.  Both are mortgages with few legal
      differences for the aunt.  If anything the HECM provides a longer period
      for the heirs to deal with the situation if grandma passes away while the HECM
      is still active.  

       

  • tbgy,

    The aunt says she realizes there is a line of credit on the property.  What difference does it make if it is a HELOC or a HECM?

    Your reasoning implies that the HECM is more detrimental than a HELOC.  Do you understand how a HELOC works?

    How would the planning change one inch if the aunt knew it was a HECM rather than a HELOC?  Please explain.  If anything the HECM would give her more time to exercise whatever option she deemed fit following the death of the grandmother.

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