For reverse mortgage originators and counselors, dealing with clients that are either actively going through, or intend to obtain a divorce can offer a unique challenge. While sometimes a reverse mortgage transaction can actually streamline some of the processes of divorce for the couple, having one crop up during a reverse transaction can come with its own share of unique difficulties.
“Grey divorce,” the term used to describe the phenomenon of couples who choose to end their marriages after age 50, is on the rise. According to the Pew Research Center, the rate of divorce for Americans 50 and older has roughly doubled since the 1990s, and the rate only increases for Americans that are even older.
“In 2015, for every 1,000 married persons ages 50 and older, 10 divorced – up from five in 1990, according to data from the National Center for Health Statistics and U.S. Census Bureau,” Pew writes. “Among those ages 65 and older, the divorce rate has roughly tripled since 1990, reaching six people per 1,000 married persons in 2015.”
Because of that increasing commonality, it’s only natural that some reverse mortgage industry players find themselves having to deal with divorce situations among their senior clientele, sometimes in interesting ways.
Impacts on reverse mortgage counseling
While counseling organization Money Management International (MMI) has not tracked specifically how divorce among seniors relates to Home Equity Conversion Mortgage (HECM) loans and counseling, it’s certainly an element that can introduce complications at every level of creating a new loan, counseling included. This is according to Jackie Boies, senior director of housing and bankruptcy services at MMI.
“Divorce and reverse mortgages is an interesting topic; sometimes messy, of course,” she tells RMD. “When a client requests counseling and we learn there is a divorce in progress, many are surprised to learn that their soon-to-be-ex will also need to be counseled, even if they are not on the title or deed to the home.”
If a couple seeking the counseling has not legally finalized their divorce, then recent rules implemented that govern the treatment of non-borrowing spouses apply, Boies says.
“Even [a spouse] not on the title or deed and [who is] not signing the reverse mortgage loan, must receive counseling,” Boies says.
This can understandably surprise some clients, who may choose to wait until the divorce has been finalized before proceeding with the entire reverse mortgage transaction, when they can go through the counseling alone.
“In other cases, the proceeds from the reverse mortgage will be used to settle the divorce between the two parties, and generally this couple is prepared to complete counseling together,” she says. “Certainly a divorce in progress makes reverse mortgage counseling a bit more complex.”
Impacts on origination
Divorce can present some unique challenges for loan officers charged with originating a reverse mortgage loan in a complex situation. While not having had direct experience with handling it, reverse mortgage educator and specialist Kathy Muni of Silver Leaf Mortgage in Centennial, Colo. has discussed grey divorce on her reverse mortgage-oriented radio show, and has to understand and be ready for a divorce situation.
“The idea that the couple can both accomplish their goals of continued homeownership in separate abodes with the ability to divide the housing wealth between them seems to me to be an excellent path to take,” Muni tells RMD. “I am not sure how many divorce lawyers are familiar with the concept.”
Other times, originators find themselves having to serve as a mediator, of sorts. For Brandi Braley of Neighborhood Mortgage in Bellingham, Wash., dealing with a divorce in a reverse transaction is a relatively recent reality for her to contend with that has added an additional layer of complexity on top of a transaction. In her case, a recent marriage went south constituting a need to change the terms of a previously-closed loan.
“The wife owned the home, got a reverse mortgage, added the new husband and now needs to refinance because they are divorcing and he needs to come off of the loan,” Braley tells RMD. “I do know in this case that she would not be pursuing a HECM-to-HECM if it were not for the fact that she can’t get her ex-husband off of the loan any other way. She would be in the exact same position if it were a forward mortgage we were talking about.”
Impacts on aging in place, particularly for women
Having come from a starting position in the forward mortgage world, dealing with divorce is not entirely new to Braley, but the nuances of reverse mortgages add some wrinkles to the process that take some getting used to, and in her experience the divorce situations seem to hit female spouses harder than their male counterparts.
“I can’t comment on this sort of situation being on the rise, but I do see a lot of divorced women, especially those who are turning to reverse mortgages because they need the additional income to be able to stay in their homes,” Braley says. “As you know, women traditionally have had lower income and thus lower Social Security income in their retirement years. Traditionally, women have taken on the caregiver roles while their husbands have worked and climbed the corporate ladder giving them the pensions and the higher Social Security payments later in life.”
This helps to emphasize that a reverse mortgage is a viable option, particularly for divorced women who are looking for ways to cut down on their housing expenses in later years.
“The reverse mortgage is an option for these women who need it to eliminate a monthly mortgage payment, or to help supplement their income and stay in their home,” she says.
Another option that is lesser-used industry-wide that could have unique applications for divorcing spouses is a reverse mortgage for purchase transaction, Braley says. She has yet to conduct one, but sees that little-used option as having particular viability for spouses that have decided to move on from one another.
“I feel that a reverse for purchase would be a great option for someone going through a divorce. They may not need or want the bigger homes that they once had, or because of the divorce they may be forced to sell the home that they once shared with their spouse and split the proceeds,” she says. “A reverse for purchase would put them back into their own home without having to worry about a monthly payment. This would be a very attractive option for someone who is losing the other spouse’s income.”