NY Times: Inheritance Blinds Heirs to Reverse Mortgage Realities

Even though an entire family may be involved in the discussion of whether to obtain a reverse mortgage, experts find that heirs of prospective borrowers are more concerned about losing their “presumed” inheritance than learning about the terms of the loan, reports The New York Times.

Elder law and reverse mortgage experts in the article say they frequently encounter instances where the adult children of potential reverse mortgage borrowers are “openly opposed” to the idea of their parents spending away their inheritance. 

“A lack of communication can lead to a rude awakening for adult children who still live at home and don’t realize what a reverse mortgage will mean after their parents die,” said Deborah S. Ball, a New York elder law lawyer, in the article.

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Frank Melia, a mortgage planning specialist with United Northern Mortgage Bankers in Levittown, N.Y. told The New York Times that he has noticed more adult children open to the discussion of their parents borrowing against their home equity since the recession. 

But the same statement continues to come up, he says, of adult children telling their parents: “You’re spending my inheritance.”

“Sometimes there’s just no getting through to them,” he said in the article, “because they’re just being selfish about their inheritance possibility.”

Read The New York Times article

Written by Jason Oliva

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  • This isn’t about the heirs worrying about their inheritance. It’s about the Borrower’s wishes for their assets and property once they pass. Lender’s tell the Borrower the heir will have a year to live in the property before they have to decide what to do (Purchase, sell, or deed in Lieu). If the Borrower knew the lender requires the heir have legal authority to act on behalf of the estate and loan approval 45 days after the death of the borrower or the lender would initiate foreclosure the borrower would have the chance to factor that in and decide if that was an acceptable consequence. It makes no sense to think grieving heirs be able to have loan approval and completed probate 45 days after the death of their loved one. Shame on the Reverse Mortgage Industry for deceiving the borrower and their family in order to make a sale.

    • Ms. Jolly, what you described above works the same with any mortgage product, not just reverse mortgages. Shame on you for either being selectively ignorant, conveniently ignorant, or completely ignorant in your condemnation of an entire industry.

  • This is a sad reflection of our society’s ‘entitlement’ mentality which adult children can display. The real question is whose home is it anyways? Seriously, those children to stand with their hand out waiting for mom and dad to die to inherit their home have and would do little to financially support their parents thus eliminating the need for the reverse mortgage in the first place. Also when it comes to elder financial abuse family members are the most common perpetrators.

  • I like Frank Melia’s conclusion… and believe it to be true. Some adult “children” can only see a Reverse Mortgage from the perspective of “loss-of-gift” – which invariably means “no expensive toys for me”. Perhaps if they took a closer look, they’d realize that it may be the engine to deliver “happily ever after” to their parent’s retirement, (without adding any liability to the heirs) or the vehicle that makes it unnecessary for parents to move into their kid’s home when finances run short otherwise. Would these be the same kids who would turn them away?

    Greed has an awful face, and when it’s displayed by selfish “would be” heirs, that face is even uglier.

  • I understand what the RMD article is bringing out of the NY times Article and that is the fact the heirs care more about their inheritance than about their parents well being and quality of life.

    However, I find just the opposite. In my 16 years in the reverse mortgage industry I find more children care about the well being of their parents and want them to live a better quality of life than the other.

    Sure, we will always have those children that care more about the inheritance issue and will fight the parents tooth and nail about why they should NOT get a reverse mortgage.

    Since the economic crash of 2008 we may have seen more greed come out than in the past but still, the majority of children want to see their parents live as comfortable as they can as they grow older.

    John A. Smaldone

  • The Heirs do not have a year to live in the Property while they decide
    what to do. They have 30 Days to tell Lender if they will pay off loan in order to keep Home or if they plan to sell it. If it is to be sold they have 6 Months from departure or death of last Borrower to get it sold. If it hasn’t sold but they want to keep trying they can apply for two 3 month extensions, which will normally be granted so long as thay can show the House is activly listed with a Realtor, is ready for sale and occupancy. During this time they can live in the House but the Pay off is increasing Monthly. This 12month to “Decide what to do” is a common misconception.

    • In a lengthy career, I only lost a handful reverse mortgage proposals to selfish adult kids openly objecting to “losing inheritance”; usually the parents were more concerned about not leaving an inheritance to the kids. Most of the time, the parents and heirs were more worried about the classic “sandwich” issue: having to support their parents while they were still raising their own kids. If these were things people were worried about, then the discussion is a planning issue on how to best minimize the downside risk to all parties instead of just a loan application.
      Especially with an adjustable rate HECM’s flexible payout plan, the heirs would still be likely to receive some inheritance from the value of their parents home while, in the meantime, the reverse funds could pay for home health care, household maintenance service, etc. If these were potential needs and expenses instead of immediate ones, then the reverse could work even more favorably for both parents and heirs.

  • Did the originators the NYT is talking about just cut their teeth on fixed HECMs?

    My experience lines up with John’s… In a lengthy career, I only lost a handful reverse mortgage proposals to selfish adult kids openly objecting to “losing their inheritance”. Usually the parents were more concerned about not leaving an inheritance to the kids. Most of the time, the heirs (and parents) were more worried about the classic “sandwich” issue: the adult children having to support their parents while they were still raising their own kids. And if they didn’t mention it, I would ask these kind of “What If” questions. If these were the things that people were worried about, then the discussion becomes about planning how to best minimize the downside risk to all parties instead of just a loan application.

    Especially with an adjustable rate HECM’s flexible payout plan, the heirs would still be likely to receive some inheritance from the value of their parents home while, in the meantime, the reverse funds could pay for home health care, household maintenance service, etc. If these were potential needs and expenses instead of immediate ones, then the reverse could work even more favorably for both parents and heirs. The entire purpose of the guaranteed Line of Credit growth exceeding the current monthly adjustable interest rate is in order to preserve equity, and a period of light or no draws of available funds optimizes these ‘moving parts’ for both the parents and the heirs. In several cases, we had the parents continuing to make mortgage payments to their reverse servicer in order to maximize the available Line of Credit and its growth and home equity and to reduce the loan balance and interest accrued.

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