With reverse mortgages “expected to gain popularity” as the population ages, the New York Times today published an article outlining some of the information borrowers should know before proceeding with the loan.
First, the Times combats a widely held misunderstanding about who owns the reverse mortgage borrower’s home.
“A common misconception about reverse mortgages is that the lender takes an equity share in the house,” the Times writes, citing reverse mortgage consultant Vivian Dye of Atlantic Residential Mortgage in Westport, Connecticut.
“It’s a relationship between the bank and the borrower,” Dye told the publication. “…and it’s the same kind of relationship as a regular loan.”
The Times explains the process by which the loan becomes due and the options heirs have for paying it off, citing an explanation from Colin Cushman of Generation Mortgage.
“Under federal regulations, after the last borrower named on the loan has died, the lender must provide up to 30 days for the heirs to decide on a repayment method,” the NY Times writes. “Heirs then have up to six months to sell or arrange financing, said Colin Cushman, the chief executive of Generation Mortgage, a reverse-mortgage originator and servicer based in Atlanta. But, he noted, as many as two 90-day extensions are allowed if the heirs can show they are actively trying to sell the property.”
Families should be aware of the loan processes and its limitations, the Times writes.
Written by Elizabeth Ecker