NBC Today Show on Reverse Mortgages: Children Not Entitled to Home Inheritance

A reverse mortgage is for the borrower, not the borrower’s children, says a Today Show segment this week in response to a reverse mortgage inquiry. In responding to a viewer question from a woman whose mother recently took out a reverse mortgage and wonders if she can now get out of the loan to maintain an inheritance from the home, Today’s financial experts including Jean Chatzky and Sharon Epperson say that it is up to the borrower, not the children or family members.

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“My now-72-year-old mother took a reverse mortgage loan…” the viewer says, “and she now realizes she will be losing her home after she either can’t live there anymore or passes away, leaving her children without an inheritance.”

Chatzky reminds the viewer that her mother received counseling as a part of the loan process, ensuring she understood the consequences.

“When she took it out, she went through counseling. She knew what she was doing because you are mandated to go through counseling before you go through with [the loan],” Chatzky says. Further, though, the experts remind the viewer that she is not entitled to an inheritance from her mother’s estate.

“I have a problem with this notion that [the borrower] owes her daughter an inheritance,” Chatzky says.

“The reverse mortgage is for the parents, the person who takes it out. Not the child,” Epperson adds.

Written by Elizabeth Ecker

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  • I felt the all of them did a great job building up the benefits of a reverse mortgage. I like what was said about the children, “They should not expect to inherit the home” from their parents! That was driven home very well. In all, it was a good segment for the reverse mortgage industry.The negative aspect came into play by not explaining the options children or airs do have with the home when the parents pass away. I felt after reading and hearing what was said that the airs would automatically lose the home, that is not true. The home  inures to the airs if dictated by a will or some other legal instrument, what they do with the home is a different story.As we all know, the airs can keep the home as long as they pay the balance off on the reverse loan, they can sell the home and retain any equity that may be available or walk away and let the lender take it back. I feel these points should have been brought out.

    However, the positives out weighed any negatives I brought up.John A. Smaldone

  • Unfortunately most of the elderly don’t see it that way. Even with the fears of the economy and the various misconceptions the program has to shoulder, leaving something to their children is usually the first thing on the mind of most seniors I speak to everyday. It’s the number one reason at my company for a client to decide against the RM. Still, I have also dealt with a lot of great children who want what’s best for their parents and not themselves. I just wish there were more like that out there.

    An African-American senior in innercity L.A. once told me that I didn’t understand that it wasn’t about money or greed, but that’s the only way her “people” (her term) get houses is by inheriting them. She said she wouldn’t have a house if she hadn’t inherited it. In other words sometimes it’s more a passing of the torch than a child’s greed or a parents misconception fo what is owed to their children, paying it forward as it were.

    It is a multi-faceted topic, but I am glad that the Today show expressed this side of it. Not a lot of public commentary delves into all the layers.

  • I am a Senior, a Reverse Mortgage Mortgagor, and a Loan Originator specializing in Reverse Mortgages, with BMS Corp in Miami. I Agree with John Smaldone that the panel should have indicated why the Borrower or their HEIRS, do not loose the home. This is a great problem we face everyday, the misconception that the property is lost.

    Also I emphsize that the Program IS for the Seniors, not the chldren. They are the ones that worked hard to achieve whatever they have today. The last few years should not have to be ones of need and angst because their incomes are not enough.
    Juan Luis Rodriguez

    • Thank you Juan, you put it very well. I am also a senior and have a reverse mortgage. We have a lot in common, maybe that is why we share the same opinion.

      John A. Smaldone

  • The parent should be the only one deciding inheritance.  It is a family matter between family members.  Lender’s have no place in the family dynamicor discussion.  The lender responsibility is to be make it vvery clear to the borrower what will be left (year by year) for the parent’s last wishes at the end of life.  And I am not talking about an amortization schedule.  . 

    • Sandy,

      No one can do that.  The biggest number one factor is what the value of the home will be on termination of the HECM.  If you can tell me that, I can begin sketching out some scenarios.

      Your mother had an adjustable rate HECM.  It had a line of credit.  If we are talking about that kind of HECM, then if you will look into the future and tell me the dates and amounts of the payouts, the date and amount of repayments before termination (if any), the changes in the interest rate index over the period through termination along with the date of termination, and once again the value of the home at termination, I can begin to forecast the value of the equity over time but without all of that, it is crystal ball time.  As to how much more likely your assumptions are to prove out true over software program writers, who knows?  The best I can say is that neither the programmed estimate of equity value nor that produced from the information you provide will be precisely correct.

      The amortization schedule only provides information based on a set of well stipulated assumptions.  I do not disdain it except to say, it is just one and only one very unlikely set of assumptions.  Is there a better set?  Only those that the borrower believes will be the most likely but even then it is a roll of the dice.

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