Consumer F - PDF document

1 Consumer F inancial You have a reverse m
Consumer F inancial You have a reverse mortgage: know your rights and responsibilities About this guideYour reverse mortgage basics..........................................................................................................Your reverse mortgage responsibilitiesRequirement 1: Your home must be your principal residenceRequirement 2: You must pay your property charges on-timeRequirement 3: You must keep your home in good conditionIf you cannot meet your loan requirementsDefault or foreclosure notices11Natural disasters11Paying back your loan......................................................................................................................Selling your house.............................................................................................................................What happens to your loan after you dieIf you have a co-borrower on your loan13If a “Non-Borrowing Spouse” lives in your home13If you have heirs...............................................................................................How to get help.................................................................................................................................Glossary IntroductionThis guide is for reverse mortgage borrowers.It provides information on:Your reverse mortgage loan requirementsHow to pay off your reverse mortgage loanHow moving out of your home or dying affects your reverse mortgage loanWhat it means to default on your loan and where to �nd help What your heirs may need to know AlertMost reverse mortgages today are Home Equity Conversion Mortgages (HECMs), which are federally insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA). This guide covers typical features and requirements for HECM reverse mortgage loans. Non-HECM reverse mortgage loans may have different requir

2 ements and features.At the back of this
ements and features.At the back of this guide is a glossary with key reverse mortgage terms and a list of organizations that provide help to reverse mortgage borrowers.In the guide, the term “you” refers to you, the borrower, and any other co-borrowers on the reverse mortgage loan. Your reverse mortgage basicsUnlike a traditional mortgage, a reverse mortgage loan is repaid when the borrowers no longer live in the home. Because interest and fees are added to the loan balance each month, the amount you owe goes up—not down—over time. As your loan balance increases, your home equity decreases. Your reverse mortgage responsibilitiesAlthough you do not make monthly mortgage payments with a reverse mortgage, there are three main requirements you must meet: Your home must be your principal (meaning primary) residenceYou must pay your property charges, like property taxes and homeowners insurance on-time3.You must keep your home in good conditionRequirement 1: Your home must be your principal residenceYour home must be your principal residence, meaning it must be where you spend the majority of the year. You can only have one principal residence at a time. As Table 1 shows, with a reverse mortgage you can only be away from your home for a certain period of time. WarningFailure to meet these requirements may lead to default or foreclosure. 4 Length of time awayEffects on your reverse mortgageYou are away for more than two months and there is no co-borrower living in the home Notify your lender or servicer so that your lender knows you continue to occupy the home as your principal residence.You are away for more than 6 months for non-medical reasons and there is no co-borrower living in the home Your home is no longer your principal residence and your loan must be paid back or satis�ed through selling the property or deed-in-lieu of foreclosure. Anyone livi

3 ng with you will have to move out unless
ng with you will have to move out unless they are able to pay back the loan.You are away for more than 12 consecutive months in a healthcare facility such as hospital, rehabilitation center, nursing home, or assisted living facility and there is no co-borrower living in the home Your home is no longer your principal residence and your loan must be paid back or satis�ed through selling the property or deed-in-lieu of foreclosure. Anyone living with you will have to move out unless they are able to pay back the loan.There is a co-borrower in the home and you permanently move for any reasonThe co-borrower may continue to live in the home and receive loan payments, so long as they continue to ful�ll the reverse mortgage loan requirements.TABLE 1: HOW LONG YOU CAN BE AWAY FROM YOUR HOME WITH A REVERSE MORTGAGE I was asked to certify that I occupy my home. What is this? What if I forgot to respond?Your lender or servicer will require you to certify each year that your home is your principal residence. Usually this is done through a postcard or other notice sent by mail at the same time each year. If your spouse is designated as an “Eligible Non-Borrowing Spouse” in the loan documents, you will also need to certify that you are still married and that your spouse lives in the home as their principal residence. To be an “Eligible Non-Borrowing Spouse” means that your spouse is not a co-borrower, but quali�es under HUD’s rules to stay in the home after the borrower dies. It is important that your annual occupancy certi�cation is signed and returned immediately. Failure to do so may lead to default or foreclosure. 6 Requirement 2: You must pay your property charges on-timeProperty charges are fees the borrower must pay under the reverse mortgage loan, which can include: Property taxes and homeowners insuranceFlood insura

4 nce premiumsGround rents, condominium fe
nce premiumsGround rents, condominium fees, planned unit development fees, or homeowners’ association feesAny other special assessmentsPaying your property chargesFor loans made before April 27, 2015: the borrower could have requested at the time the loan documents were signed, for the lender or servicer to pay the property taxes and homeowners insurance from the reverse mortgage loan funds, but was not required to do so. Generally, borrowers need to budget each year to make sure the taxes and insurance are paid on-time.For loans made after April 27, 2015: lenders evaluate your ability to pay future property taxes and homeowners insurance when making the loan. As shown in Table 2, your lender may require you to set aside loan proceeds to pay future property taxes and homeowners insurance. WarningThe money set aside to pay for your property taxes and homeowners insurance will not cover other charges like condominium fees, homeowners’ association fees, and ground rents. You are solely responsible for paying these other property charges. 7 Lender's evaluationWho pays the property taxes & homeowners insuranceIf your lender determined that you had enough money to pay future property taxes and homeowners insuranceYou can choose to:Pay your property charges directly, orHave your servicer pay your charges by using money from your reverse mortgage funds.If your lender determined that you need to “set aside” a portion of your loan proceeds as a reserve to pay your property taxes and homeowners insuranceYour lender will choose to:Pay your property taxes and homeowners insurance directly from the reserve, orSend you the money so that you can make these paymentsTABLE 2: PAYING PROPERTY CHARGES FOR LOANS AFTER APRIL 27, 2015If you are unsure if loan money was set aside, check your monthly account statement or contact your lender or servicer.If the reserve can no longer cover

5 your property taxes or homeowners insura
your property taxes or homeowners insurance, your lender will tell you. WarningUnpaid property charges could put your reverse mortgage loan in default. If you miss a payment or know that you will miss a payment, contact your lender or servicer immediately. They may pay your property charges by using money from your monthly loan pay out or, if you have one, your line of credit. If there is not enough money to cover the missed charges, your lender or servicer may advance the funds and you will be required to pay them back. Managing your property taxesHere are some ways you can manage your property taxes.You may be eligible to lower your tax payments if your state offers a tax relief program for older homeowners. If your state has a senior property tax exemption, you may need to apply to receive the bene�t. Many state programs require you to apply shortly after the tax bill is issued. To learn more, contact your local tax collector.It is important to tell your lender or servicer if you are paying your property taxes in installments. You do not want them to mistakenly believe that you missed a payment.If your lender wrongly determines that your loan is in default for unpaid property taxes, contact your lender or servicer immediately. Be ready to show proof that you have paid your property taxes. Failure to pay property taxesIf your loan falls into default due to unpaid property charges, immediately talk to your lender or servicer. You can ask for help from a HUD-certi�ed housing counseling agency or an attorney.After you default you may be able to rehabilitate the loan through a repayment plan or an “at-risk extension.” To qualify for an at-risk extension, you must be at lease 80 years old and experiencing critical circumstances, such as: a long-term disability, terminal illness, or a unique need to stay in the property. You may request to renew the at

6 -risk extension every year with proof of
-risk extension every year with proof of your need. 9 Requirement 3: You must keep your home in good conditionWhen you applied for your reverse mortgage loan, your lender evaluated whether your home met HUD‘s property requirements. Now that you have the reverse mortgage loan, you must keep your home in good condition. Your lender or servicer may inspect your home’s condition if they give you notice and specify the purpose of the inspection. They also may tell you to make repairs. How long do I have to make required repairs? You generally have 60 days to start repairs from the day your lender or servicer noti�es you. Failure to do so could lead to default or foreclosure. What if I cannot afford to make required repairs?Reach out to your local Area Agency on Aging (AAA) to �nd assistance programs that may be able to help you pay for repairs. To �nd the nearest AAA, call (800) 677-1116 or visit eldercare.acl.gov 10 WarningIf you need to hire a contractor to perform repairs on your house, you may want to:Explore and compare your options. Get estimates from several contractors on the costs of repairs.Ask people you trust for referrals.Check if a contractor is licensed through your state’s contractors’ licensing board.Have a lawyer review the contract of work.Read and understand the contract before you sign it. Make sure written contracts match any verbal promises made.Beware of contractors going door-to-door. Do not feel pressured into making a decision right away. 11 If you cannot meet the loan requirementsDefault or foreclosure noticesIf you receive a default or foreclosure notice, immediately contact your servicer to learn why. Unless steps are taken to �x the default, you may lose your home to foreclosure. Seek help from an attorney or a HUD-approved default housing counseling agency. Both can explain what options you have

7 to prevent foreclosure.Natural disaster
to prevent foreclosure.Natural disastersAfter a natural disaster, you may experience damage to your home, unexpected expenses, or a sudden loss of income. All these things may make it dif�cult for you to meet your reverse mortgage loan obligations. To �nd help, read the Reverse mortgage borrowers guide to natural disasters at, cfpb.gov/preparePaying back your loanUnless there is a co-borrower living in the home, you must typically repay the loan when you no longer live in the home. You may need to pay it back sooner if you fail to meet the obligations of the loan. 12TABLE 3: HOW YOUR REVERSE MORTGAGE IS PAID IF YOU SELL YOUR HOMESelling your houseIf you decide to sell your home while you have a reverse mortgage loan, you will have to pay back the money borrowed, plus interest and fees. As shown in Table 3, the amount you receive from the sale of your home will determine how the loan is paid back. Your homeMoney from the saleYou sell your home for at least the loan balanceThe loan is fully paid back. You get to keep whatever money is left after paying back the loan.You sell your home for at least the appraised market valueThe money from the sale pays off the outstanding loan balance. Your mortgage insurance will pay any remaining balance if the sale does not cover the amount owed.Your reverse mortgage loan is in default and you have received a notice that the loan is “due and payable”You may sell your home for 95 percent of its appraised value or the amount owed on the loan, whichever is less. The money from the sale will go towards paying the outstanding loan balance.Your mortgage insurance will pay any remaining balance if the sale does not cover the loan balance. 13What happens to your loan after you dieUnless there is a co-borrower living in the home, when, you die the loan has to be paid back. As described below, when it must be paid back is compli

8 cated. If you have a co-borrower on your
cated. If you have a co-borrower on your loanAfter a borrower dies, any co-borrower on the loan may continue to receive the bene�ts of the reverse mortgage loan and may stay in the home as long as they continue to ful�ll the loan obligations. If a “Non-Borrowing Spouse” lives in your homeYour Non-Borrowing Spouse may stay in the home if they pay off the loan. They may also be able to stay in the home without paying off the loan depending on when the loan was taken out and whether they qualify under HUD’s rules. The process may be dif�cult. Your Non-Borrowing Spouse may want to get help from an attorney or a HUD-certi�ed housing counseling agency. TipIt is a good idea to check with your lender or servicer to make sure your loan records are correct. Con�rm your co-borrower is listed on the loan. 14 If your loan case number was assigned on or after August 4, 2014Your lender or servicer will determine if your Non-Borrowing Spouse quali�es to stay in the home after you die (called a "deferral period"). To qualify your Non-Borrowing Spouse must:Establish their ownership interest to the property or a legal right to remain in the home for life. This must be provided to the lender or servicer within 90 days of the borrower’s death.Have been married to the borrower at the time the loan documents were signed up until the borrower’s death. For couples who were unable to be legally married based on gender at the time the reverse mortgage loan was made, they must show that they were legally married by the time of the borrower’s death.Have been identi�ed in the loan documents as a Non-Borrowing Spouse.Have lived, and continue to live, in the home as their principal residence. Continue to meet the loan requirements and make sure the loan does not become due and payable for any other reason.If you

9 r loan case number was assigned before A
r loan case number was assigned before August 4, 2014After the borrower dies, the lender or servicer has two options. They can: Foreclose on the home, orEnter a process called “Mortgage Optional Election (MOE) Assignment” that allows the Non-Borrowing Spouse to stay in the home. Foreclosure If your lender or servicer decides to foreclose on the home or �nds that the Non-Borrowing Spouse does not qualify for MOE Assignment, they must begin foreclosure proceedings within six months of the borrower’s death. If the Non-Borrowing spouse is actively trying to sell the property or satisfy the debt in some other way, they may request a delay with the foreclosure for up to a 180 days. MOE Assignment If the lender or servicer decides not to foreclose and to enter the MOE Assignment process, to qualify your Non-Borrowing Spouse must:Have been married to the borrower at the time the loan documents were signed up until the borrower’s death. For couples who were unable to be legally married based on gender at the time the reverse mortgage loan was taken out, they must show that they were legally married by the time of the borrower’s death.Have lived since the beginning of the loan, and continue to live, in the home as their principal residence. Provide their Social Security number or Tax Identi�cation Number.Agree that they will no longer receive any payments from the reverse mortgage loan.Continue to meet all loan obligations, including paying property taxes and homeowners insurance.Ensure that the reverse mortgage loan does not become due and payable for any other reason. TipIf the Non-Borrowing Spouse receives a foreclosure notice, they should take immediate action and not ignore it. 16 TipIf you live with a Non-Borrowing Spouse, consider:Gathering all documents that support your spouse's claim of being an Eligible Non-Borrowing Spouse. These docu

10 ments may include a marriage certi
ments may include a marriage certi�cate and property deed.Seeking legal advice if you believe your spouse should be on the loan. If your spouse is not on the loan, talk to a lawyer about transferring the property to your spouse when you die.If you have heirsIf your heirs want to keep your home after you and your spouse die, they will have to repay either the full loan balance or 95 percent of the home’s appraised value – whichever is less. Talk to your heirs now. Prepare for any non-borrowing family members living in the home by deciding what they will do after you die. 17 How to get helpIf you’re having trouble with your reverse mortgage, here’s what you can do to get help:As a borrower you have a right to request information from or dispute any errors with your lender or servicer. To learn more got to, consumer�nance.gov/askcfpb/1855Consult an attorney. If you need help �nding an attorney, visit your local or state bar. You may qualify for free legal services. To �nd a legal aid of�ce, go to lsc.govTalk to a housing counselor. HUD-approved housing counseling agencies offer free or low-cost expert assistance. You can �nd a housing counseling agency by going to hud.gov or calling (800) 569-4287. Reach out to Area Agencies on Aging (AAA) to �nd state and local assistance programs that may be able to help you pay for property charges or needed home repairs. To �nd the nearest AAA, call (800) 677-1116 or visit eldercare.acl.govSubmit a complaint with the CFPB if you are having problems with your lender or servicer by going to consumer�nance.gov or by calling toll-free (855) 411-CFPB (2372). Find more information on reverse mortgage issues at consumer�nance.gov/reversemortgage 18 Glossary DEFINED TERMDEFINITIONAppraisalA written document that shows an opinion

11 of how much a property is worth. It desc
of how much a property is worth. It describes what makes the property valuable and may show how it compares to other properties in the neighborhood.Co-borrowerA person, usually your spouse or partner, who also signs the reverse mortgage loan note and who is equally responsible for ful�lling all the loan obligations and who also receives the bene�ts from the loan.Deed-in-lieu of foreclosureAn arrangement where you voluntarily turn over ownership of your home to the lender to avoid the foreclosure process.DefaultThe failure to meet the loan requirements included in the reverse mortgage. For example, the requirements of a Home Equity Conversion Mortgages (HECM) loan include occupying the home as the principal residence, keeping the home in good repair, and paying the property charges on-time. A borrower’s failure to ful�l these obligations would cause the loan to default and may lead to foreclosure.Eligible Non-Borrowing SpouseA borrower’s spouse who is not a co-borrower, but quali�es under HUD’s rules to stay in the home after the borrower has died.EquityThe amount your property is currently worth, less the amount owed on any existing mortgages on your property. 20 DEFINED TERMDEFINITIONFederal Housing Administration (FHA)The federal agency that insures HECMs, the most common type of reverse mortgage loan. FHA is a part of the U.S. Department of Housing and Urban Development (HUD). ForeclosureThe process where the lender takes back property because the borrower no longer ful�lls the obligations of the reverse mortgage loan. Foreclosure processes differ by state. Home Equity Conversion Mortgage (HECM)The most common type of reverse mortgage today. One way they differ from private reverse mortgages (sometimes called “proprietary” reverse mortgages) is that HECMs are federally insured by the FHA.Homeowners Insuranc

12 ePays for losses and damage to your prop
ePays for losses and damage to your property if something unexpected happens, like a �re or burglary. Standard homeowners insurance doesn’t cover damage from earthquakes or �oods, but it may be possible to add this coverage. Homeowners insurance is also sometimes referred to as "hazard insurance." Borrowers with a HECM loan are required to maintain homeowners insurance in addition to, the mortgage insurance also required with a reverse mortgage loan. HUD-Approved Housing Counseling AgencyAn organization with housing counselors that are approved by HUD. Borrowers taking out a HECM reverse mortgage loan must receive counseling from a HUD-approved reverse mortgage counseling agency before receiving the loan. 21 DEFINED TERMDEFINITIONLenderThe �nancial institution that loaned the borrower money.Loss MitigationThe steps mortgage servicers take to work with a borrower to avoid foreclosure. Loss mitigation refers to a servicer’s responsibility to reduce or “mitigate” the loss to the investor that can come from a foreclosure. Certain loss mitigation options may help you stay in your home. Other options may help you leave your home without going through foreclosure. Loss mitigation options for reverse mortgage borrowers may include deed-in-lieu of foreclosure or a repayment plan.Maximum Claim AmountThe lesser of the appraised value of the home, the sales price of the home being purchased, or the maximum limit HUD will insure. The maximum claim amount is one factor used to calculate how much a homeowner can borrow with a reverse mortgage loan.Mortgage Insurance PremiumAn initial and annual amount charged by the lender and paid to the Federal Housing Administration. Mortgage insurance is in addition to the homeowners insurance the borrower must maintain. Origination FeesA one-time upfront fee that the lender charges the borrower for making

13 the loan. These fees are limited by the
the loan. These fees are limited by the maximum claim amount and may not exceed $6,000. 22 DEFINED TERMDEFINITIONPrincipal LimitThe amount of money the borrower can borrow with a reverse mortgage loan. The principal limit for a HECM is calculated using the age of the youngest borrower or Eligible Non-Borrowing Spouse, the interest rate on the loan, and the maximum claim amount. The principal limit generally will increase each month, possibly making additional funds available for borrowers with adjustable rate HECMs, but not �xed-rate HECMs. In general, loans with older borrowers, higher-priced homes, and lower interest rates will have higher principal limits than loans with younger borrowers, lower-priced homes, and higher interest rates. Principal ResidenceThe dwelling where the borrower, and if applicable, the Non-Borrowing Spouse, maintains their permanent home and where they typically spend the majority of the year. A borrower may only have one principal residence at a time. If the borrower moves someplace else for a majority of the year, or to a nursing or assisted living facility for more than 12 consecutive months, the borrower must pay back the reverse mortgage loan. Proprietary Reverse MortgageReverse mortgage loans that are not insured by the federal government and are typically designed for borrowers with higher home values than those insured by HUD. Notes Notes Websiteconsumer�nance.gov/reversemortgage General inquiriesConsumer Financial Protection Bureau1700 G Street NWWashington DC 20552Submit a complaint by phone855-411-CFPB (2372); TTY/TDD 855-72K-CFPB (2372) Submit a complaint onlineconsumer�nance.gov/complaintMarch 2020 Consumer F inancial Protection Bureau YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RESPONSIBILITIES YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RESPONSIBILITIES How to get help If you’re having trouble w

14 ith your reverse mortgage, here’s w
ith your reverse mortgage, here’s what you can do to get help: As a borrower you have a right to request information from or dispute any errors with your lender or servicer. To learn more got to, consumer�nance.gov/askcfpb/1855Consult an attorney. If you need help �nding an attorney, visit your local or state bar. You may qualify for free legal services. To �nd a legal aid of�ce, go to sc.govTalk to a housing counselor. HUD-approved housing counseling agencies offer free or low-cost expert assistance. You can �nd a housing counseling agency by going to hud.gov or calling (800) 569-4287. each out to Area Agencies on Aging (AAA) to �nd state and local assistance programs that may be able to help you pay for property charges or needed home repairs. To �nd the nearest AAA, call (800) 677-1116 or visit eldercare. acl.govSubmit a complaint with the CFPB if you are having problems with your lender or servicer by going to consumer�nance.gov or by calling toll-free (855) 411-CFPB (2372). Find more information on reverse mortgage issues at consumer�nance.gov/reversemortgage 18 �� &#x/MCI; 0 ;&#x/MCI; 0 ; Tip If you live with a Non-Borrowing Spouse, consider: Gathering all documents that support your spouse's claim of being an Eligible Non-Borrowing Spouse. These documents may include a marriage certi�cate and property deed.Seeking legal advice if you believe your spouse should be on the loan. If your spouse is not on the loan, talk to a lawyer about transferring the property to your spouse when you die. If you have heirs If your heirs want to keep your home after you and your spouse die, they will have to repay either the full loan balance or 95 percent of the home’s appraised value – whichever is less. Talk to your heirs now. Prepare for any non-

15 borrowing family members living in the h
borrowing family members living in the home by deciding what they will do after you die. Foreclosure If your lender or servicer decides to foreclose on the home or �nds that the Non-Borrowing Spouse does not qualify for MOE Assignment, they must begin foreclosure proceedings within six months of the borrower’s death. If the Non-Borrowing spouse is actively trying to sell the property or satisfy the debt in some other way, they may request a delay with the foreclosure for up to a 180 days. Tip If the Non-Borrowing Spouse receives a foreclosure notice, they should take immediate action and not ignore it. MOE Assignment If the lender or servicer decides not to foreclose and to enter the MOE Assignment process, to qualify your Non-Borrowing Spouse must: Have been married to the borrower at the time the loan documents were signed up until the borrower’s death. For couples who were unable to be legally married based on gender at the time the reverse mortgage loan was taken out, they must show that they were legally married by the time of the borrower’s death. Have lived since the beginning of the loan, and continue to live, in the home as their principal residence. Provide their Social Security number or Tax Identi�cation Number.Agree that they will no longer receive any payments from the reverse mortgage loan. Continue to meet all loan obligations, including paying property taxes and homeowners insurance. Ensure that the reverse mortgage loan does not become due and payable for any other reason. If your loan case number was assigned on or after August 4, 2014 Your lender or servicer will determine if your Non-Borrowing Spouse quali�es to stay in the home after you die (called a "deferral period"). To qualify your Non-Borrowing Spouse must: Establish their ownership interest to the property or a legal right to remain in the home f

16 or life. This must be provided to the le
or life. This must be provided to the lender or servicer within 90 days of the borrower’s death. Have been married to the borrower at the time the loan documents were signed up until the borrower’s death. For couples who were unable to be legally married based on gender at the time the reverse mortgage loan was made, they must show that they were legally married by the time of the borrower’s death. Have been identi�ed in the loan documents as a Non-Borrowing Spouse.Have lived, and continue to live, in the home as their principal residence. Continue to meet the loan requirements and make sure the loan does not become due and payable for any other reason. If your loan case number was assigned before August 4, 2014 After the borrower dies, the lender or servicer has two options. They can: Foreclose on the home, or Enter a process called “Mortgage Optional Election (MOE) Assignment” that allows the Non-Borrowing Spouse to stay in the home. Notes �� ebsite consumer�nance.gov/reversemortgageGeneral inquiries Consumer Financial Protection Bureau 1700 G Street NW Washington DC 20552 ubmit a complaint by phone 855-411-CFPB (2372); TTY/TDD 855-72K-CFPB (2372) Submit a complaint online consumer�nance.gov/complaint Consumer Financial otection Bur March 2020 Notes DEFINED TERM DEFINITION Principal Limit The amount of money the borrower can borrow with a reverse mortgage loan. The principal limit for a HECM is calculated using the age of the youngest borrower or Eligible Non-Borrowing Spouse, the interest rate on the loan, and the maximum claim amount. The principal limit generally will increase each month, possibly making additional funds available for borrowers with adjustable rate HECMs, but not �xed-rate HECMs. In general, loans with older borrowers, higher-priced homes, and lower interest rates will have highe

17 r principal limits than loans with young
r principal limits than loans with younger borrowers, lower-priced homes, and higher interest rates. Principal Residence The dwelling where the borrower, and if applicable, the Non-Borrowing Spouse, maintains their permanent home and where they typically spend the majority of the year. A borrower may only have one principal residence at a time. If the borrower moves someplace else for a majority of the year, or to a nursing or assisted living facility for more than 12 consecutive months, the borrower must pay back the reverse mortgage loan. Reverse mortgage loans that are not insured by the Proprietary federal government and are typically designed for Reverse borrowers with higher home values than those insured Mortgage by HUD. s s 22 DEFINED TERM DEFINITION The �nancial institution that loaned the borrower Lender money. Loss Mitigation The steps mortgage servicers take to work with a borrower to avoid foreclosure. Loss mitigation refers to a servicer’s responsibility to reduce or “mitigate” the loss to the investor that can come from a foreclosure. Certain loss mitigation options may help you stay in your home. Other options may help you leave your home without going through foreclosure. Loss mitigation options for reverse mortgage borrowers may include deed-in-lieu of foreclosure or a repayment plan. The lesser of the appraised value of the home, the sales price of the home being purchased, or the Maximum Claim maximum limit HUD will insure. The maximum claim Amount amount is one factor used to calculate how much a homeowner can borrow with a reverse mortgage loan. Mortgage Insurance Premium An initial and annual amount charged by the lender and paid to the Federal Housing Administration. Mortgage insurance is in addition to the homeowners insurance the borrower must maintain. A one-time upfront fee that the lender charges the borrower for maki

18 ng the loan. These fees are limited Orig
ng the loan. These fees are limited Origination Fees by the maximum claim amount and may not exceed $6,000. DEFINED TERM DEFINITION Federal Housing The federal agency that insures HECMs, the most Administration common type of reverse mortgage loan. FHA is a (FHA) part of the U.S. Department of Housing and Urban Development (HUD). The process where the lender takes back property because the borrower no longer ful�lls the obligations Foreclosure of the reverse mortgage loan. Foreclosure processes differ by state. Home Equity The most common type of reverse mortgage today. Conversion One way they differ from private reverse mortgages Mortgage (sometimes called “proprietary” reverse mortgages) is (HECM) that HECMs are federally insured by the FHA. Pays for losses and damage to your property if something unexpected happens, like a �re or burglary. Standard homeowners insurance doesn’t cover damage from earthquakes or �oods, but it may be possible Homeowners to add this coverage. Homeowners insurance is also Insurance sometimes referred to as "hazard insurance." Borrowers with a HECM loan are required to maintain homeowners insurance in addition to, the mortgage insurance also required with a reverse mortgage loan. HUD-Approved An organization with housing counselors that are Housing approved by HUD. Borrowers taking out a HECM Counseling reverse mortgage loan must receive counseling from a Agency HUD-approved reverse mortgage counseling agency before receiving the loan. 20 Glossary DEFINED TERM DEFINITION Appraisal A written document that shows an opinion of how much a property is worth. It describes what makes the property valuable and may show how it compares to other properties in the neighborhood. Co-borrower A person, usually your spouse or partner, who also signs the reverse mortgage loan note and who is equally responsible fo

19 r ful�lling all the loan obli
r ful�lling all the loan obligations and who also receives the bene�ts from the loan.Deed-in-lieu of foreclosure An arrangement where you voluntarily turn over ownership of your home to the lender to avoid the foreclosure process. Default The failure to meet the loan requirements included in the reverse mortgage. For example, the requirements of a Home Equity Conversion Mortgages (HECM) loan include occupying the home as the principal residence, keeping the home in good repair, and paying the property charges on-time. A borrower’s failure to ful�l these obligations would cause the loan to default and may lead to foreclosure. Eligible Non-Borrowing Spouse A borrower’s spouse who is not a co-borrower, but quali�es under HUD’s rules to stay in the home after the borrower has died. Equity The amount your property is currently worth, less the amount owed on any existing mortgages on your property. 19 If you cannot meet the loan requirements Default or foreclosure notices If you receive a default or foreclosure notice, immediately contact your servicer to learn why. Unless steps are taken to �x the default, you may lose your home to foreclosure. Seek help from an attorney or a HUD-approved default housing counseling agency. Both can explain what options you have to prevent foreclosure. Natural disasters After a natural disaster, you may experience damage to your home, unexpected expenses, or a sudden loss of income. All these things may make it dif�cult for you to meet your reverse mortgage loan obligations. To �nd help, read the Reverse mortgage borrowers guide to natural disasters at, cfpb.gov/preparePaying back your loan Unless there is a co-borrower living in the home, you must typically repay the loan when you no longer live in the home. You may need to pay it back sooner if you fail to meet the obli

20 gations of the loan. What happens to yo
gations of the loan. What happens to your loan after you die Unless there is a co-borrower living in the home, when, you die the loan has to be paid back. As described below, when it must be paid back is complicated. If you have a co-borrower on your loan After a borrower dies, any co-borrower on the loan may continue to receive the bene�ts of the reverse mortgage loan and may stay in the home as long as they continue to ful�ll the loan obligations. Tip It is a good idea to check with your lender or servicer to make sure your loan records are correct. Con�rm your co-borrower is listed on the loan. If a “Non-Borrowing Spouse” lives in your home Your Non-Borrowing Spouse may stay in the home if they pay off the loan. They may also be able to stay in the home without paying off the loan depending on when the loan was taken out and whether they qualify under HUD’s rules. The process may be dif�cult. Your Non-Borrowing Spouse may want to get help from an attorney or a HUD-certi�ed housing counseling agency. g g 13 Selling your house If you decide to sell your home while you have a reverse mortgage loan, you will have to pay back the money borrowed, plus interest and fees. As shown in Table 3, the amount you receive from the sale of your home will determine how the loan is paid back. TABLE 3: HOW YOUR REVERSE MORTGAGE IS PAID IF YOU SELL YOUR HOME Your home Money from the sale You sell your home The loan is fully paid back. for at least the loan You get to keep whatever money is left after paying back the loan. balance You sell your home The money from the sale pays off the outstanding loan balance. for at least the Your mortgage insurance will pay any remaining balance if the appraised market sale does not cover the amount owed. value Your reverse You may sell your home for 95 percent of its appraised value or mortgage l

21 oan the amount owed on the loan, whichev
oan the amount owed on the loan, whichever is less. is in default and The money from the sale will go towards paying the outstanding you have received loan balance. a notice that the loan is “due and Your mortgage insurance will pay any remaining balance if the payable” sale does not cover the loan balance. ��12 �� &#x/MCI; 0 ;&#x/MCI; 0 ; Warning If you need to hire a contractor to perform repairs on your house, you may want to: Explore and compare your options. Get estimates from several contractors on the costs of repairs. Ask people you trust for referrals. Check if a contractor is licensed through your state’s contractors’ licensing board. Have a lawyer review the contract of work. Read and understand the contract before you sign it. Make sure written contracts match any verbal promises made. Beware of contractors going door-to-door. Do not feel pressured into making a decision right away. Requirement 3: You must keep your home in good condition When you applied for your reverse mortgage loan, your lender evaluated whether your home met HUD‘s property requirements. Now that you have the reverse mortgage loan, you must keep your home in good condition. Your lender or servicer may inspect your home’s condition if they give you notice and specify the purpose of the inspection. They also may tell you to make repairs. How long do I have to make required repairs? You generally have 60 days to start repairs from the day your lender or servicer noti�es you. Failure to do so could lead to default or foreclosure. What if I cannot afford to make required repairs? Reach out to your local Area Agency on Aging (AAA) to �nd assistance programs that may be able to help you pay for repairs. To �nd the nearest AAA, call (800) 677-1116 or visit eldercare.acl.gov TABLE 2: PAYING PROPERTY CHARGES FOR LOANS

22 AFTER APRIL 27, 2015 Lender's evaluati
AFTER APRIL 27, 2015 Lender's evaluation Who pays the property taxes & homeowners insurance If your lender determined You can choose to: that you had enough Pay your property charges directly, or money to pay future property taxes and Have your servicer pay your charges by using money homeowners insurance from your reverse mortgage funds. If your lender determined Your lender will choose to: that you need to “set aside” a portion of your Pay your property taxes and homeowners insurance loan proceedsdirectly from the reserve, or as a reserve to pay your property Send you the money so that you can make these taxes and homeowners paymentsinsurance If you are unsure if loan money was set aside, check your monthly account statement or contact your lender or servicer. If the reserve can no longer cover your property taxes or homeowners insurance, your lender will tell you. Warning Unpaid property charges could put your reverse mortgage loan in default. If you miss a payment or know that you will miss a payment, contact your lender or servicer immediately. They may pay your property charges by using money from your monthly loan pay out or, if you have one, your line of credit. If there is not enough money to cover the missed charges, your lender or servicer may advance the funds and you will be required to pay them back. �� &#x/MCI; 0 ;&#x/MCI; 0 ;Managing your property taxes Here are some ways you can manage your property taxes. You may be eligible to lower your tax payments if your state offers a tax relief program for older homeowners. If your state has a senior property tax exemption, you may need to apply to receive the bene�t. Many state programs require you to apply shortly after the tax bill is issued. To learn more, contact your local tax collector. It is important to tell your lender or servicer if you are paying your property taxes in install

23 ments. You do not want them to mistakenl
ments. You do not want them to mistakenly believe that you missed a payment. If your lender wrongly determines that your loan is in default for unpaid property taxes, contact your lender or servicer immediately. Be ready to show proof that you have paid your property taxes. Failure to pay property taxes If your loan falls into default due to unpaid property charges, immediately talk to your lender or servicer. You can ask for help from a HUD-certi�ed housing counseling agency or an attorney. After you default you may be able to rehabilitate the loan through a repayment plan or an “at-risk extension.” To qualify for an at-risk extension, you must be at lease 80 years old and experiencing critical circumstances, such as: a long-term disability, terminal illness, or a unique need to stay in the property. You may request to renew the at-risk extension every year with proof of your need. Requirement 2: You must pay your property charges on-time Property charges are fees the borrower must pay under the reverse mortgage loan, which can include: Property taxes and homeowners insurance Flood insurance premiums Ground rents, condominium fees, planned unit development fees, or homeowners’ association fees Any other special assessments Paying your property charges For loans made before April 27, 2015: the borrower could have requested at the time the loan documents were signed, for the lender or servicer to pay the property taxes and homeowners insurance from the reverse mortgage loan funds, but was not required to do so. Generally, borrowers need to budget each year to make sure the taxes and insurance are paid on-time. For loans made after April 27, 2015: lenders evaluate your ability to pay future property taxes and homeowners insurance when making the loan. As shown in Table 2, your lender may require you to set aside loan proceeds to pay future propert

24 y taxes and homeowners insurance. Warnin
y taxes and homeowners insurance. Warning The money set aside to pay for your property taxes and homeowners insurance will not cover other charges like condominium fees, homeowners’ association fees, and ground rents. You are solely responsible for paying these other property charges. �� &#x/MCI; 0 ;&#x/MCI; 0 ;I was asked to certify that I occupy my home. What is this? What if I forgot to respond? Your lender or servicer will require you to certify each year that your home is your principal residence. Usually this is done through a postcard or other notice sent by mail at the same time each year. If your spouse is designated as an “Eligible Non-Borrowing Spouse” in the loan documents, you will also need to certify that you are still married and that your spouse lives in the home as their principal residence. To be an “Eligible Non-Borrowing Spouse” means that your spouse is not a co-borrower, but quali�es under HUD’s rules to stay in the home after the borrower dies. It is important that your annual occupancy certi�cation is signed and returned immediately. Failure to do so may lead to default or foreclosure. TABLE 1: HOW LONG YOU CAN BE AWAY FROM YOUR HOME WITH A REVERSE MORTGAGE Length of time away Effects on your reverse mortgage You are away for more Notify your lender or servicer so that your lender knows you than two months and continue to occupy the home as your principal residence. there is no co-borrower living in the home ou are away for more than 6 months for non-medical reasons and there is no co-borrower living in the home Your home is no longer your principal residence and your loan must be paid back or satis�ed through selling the property or deed-in-lieu of foreclosure. Anyone living with you will have to move out unless they are able to pay back the loan. You are

25 away for more than 12 consecutive months
away for more than 12 consecutive months in a healthcare facility such as hospital, rehabilitation center, nursing home, or assisted living facility and there is no co-borrower living in the home Your home is no longer your principal residence and your loan must be paid back or satis�ed through selling the property or deed-in-lieu of foreclosure. Anyone living with you will have to move out unless they are able to pay back the loan. There is a co-borrower The co-borrower may continue to live in the home and receive in the home and you loan payments, so long as they continue to ful�ll the reverse permanently move for mortgage loan requirements. any reason 4 �� &#x/MCI; 0 ;&#x/MCI; 0 ;Your reverse mortgage basics Unlike a traditional mortgage, a reverse mortgage loan is repaid when the borrowers no longer live in the home. Because interest and fees are added to the loan balance each month, the amount you owe goes up—not down—over time. As your loan balance increases, your home equity decreases. Your reverse mortgage responsibilities Although you do not make monthly mortgage payments with a reverse mortgage, there are three main requirements you must meet: Your home must be your principal (meaning primary) residence You must pay your property charges, like property taxes and homeowners insurance on-time 3. You must keep your home in good condition Warning Failure to meet these requirements may lead to default or foreclosure. Requirement 1: Your home must be your principal residence Your home must be your principal residence, meaning it must be where you spend the majority of the year. You can only have one principal residence at a time. As Table 1 shows, with a reverse mortgage you can only be away from your home for a certain period of time. ��   Introduction This guide is for reverse mortgage borrowers. It provides inf

26 ormation on: Your reverse mortgage loan
ormation on: Your reverse mortgage loan requirements How to pay off your reverse mortgage loan How moving out of your home or dying affects your reverse mortgage loan What it means to default on your loan and where to �nd help What your heirs may need to know Most reverse mortgages today are Home Equity Conversion Mortgages (HECMs), which are federally insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA). This guide covers typical features and requirements for HECM reverse mortgage loans. Non-HECM reverse mortgage loans may have different requirements and features. lert At the back of this guide is a glossary with key reverse mortgage terms and a list of organizations that provide help to reverse mortgage borrowers. In the guide, the term “you” refers to you, the borrower, and any other co-borrowers on the reverse mortgage loan. �� &#x/MCI; 0 ;&#x/MCI; 0 ;About this guide Your reverse mortgage basics .......................................................................................................... our reverse mortgage responsibilities .......................................................................................... 3 equirement 1 our home must be your principal residence .................... 3 equirement 2 ou must pay your property charges on-time ................... 6 equirement 3 ou must keep your home in good condition ................... you cannot meet your loan requirements ................................................................................. efault or foreclosure notices ....................................................................... Natural disasters .............................................................................................. Paying back your loan ................................................

27 ........................................
...................................................................... elling your house ............................................................................................................................. hat happens to your loan after you die ..................................................................................... If you have a co-borrower on your loan........................................................ 13 If a “Non-Borrowing Spouse” lives in your home 13 If you have heirs ............................................................................................... ow to get help................................................................................................................................. Glossary Consumer Financial otection BurYou have a reverse mortgage: know your rights and responsibilities YOU HAVE A REVERSE MORTGAGE: KNOW YOUR RESPONSIBILITIES Foreclosure If your lender or servicer decides to foreclose on the home or �nds that the Non-Borrowing Spouse does not qualify for MOE Assignment, they must begin foreclosure proceedings within six months of the borrower’s death. If the Non-Borrowing spouse is actively trying to sell the propety or satisfy the debt in some other way, they may request a delay with the foreclosure for up to 180 days. If the Non-Borrowing Spouse receives a foreclosure notice, they should take immediate action and not ignore it. MOE Assignment If the lender or servicer decides not to foreclose and to enter the MOE Assignment process, to qualify your Non-Borrowing Spouse must: Have been married to the borrower at the time the loan documents weresigned up until the borrower’s death. For couples who were unable to belegally married based on gender at the time the reverse mortgage loanwas taken out, they must show that they were legally married by the timeof the borrower’s

28 death.Have lived since the beginning of
death.Have lived since the beginning of the loan, and continue to live, in thehome as their principal residence.Provide their Social Security number or Tax Identi�cation Number.Agree that they will no longer receive any payments from the reversemortgage loan.Continue to meet all loan obligations, including paying property taxes andhomeowners insurance.Ensure that the reverse mortgage loan does not become due and payablefor any other reason. �� &#x/MCI; 0 ;&#x/MCI; 0 ;Managing your property taxes Here are some ways you can manage your property taxes. You may be eligible to lower your tax payments if your state offers a taxrelief program for older homeowners. If your state has a senior propertytax exemption, you may need to apply to receive the bene�t. Manystate programs require you to apply shortly after the tax bill is issued.To learn more, contact your local tax collector.It is important to tell your lender or servicer if you are paying yourproperty taxes in installments. You do not want them to mistakenlybelieve that you missed a payment.If your lender wrongly determines that your loan is in default for unpaidproperty taxes, contact your lender or servicer immediately. Be readyto show proof that you have paid your property taxes. Failure to pay propety taxes If your loan falls into default due to unpaid propety charges, immediately talk to your lender or service. You can ask for help from a HUD-ceti�ed usinunselingencytorney. ter you default you may be able to rehabilitate the loan through a at-risk extension.” circumstances, such as: a long-term disability, terminal illness, or a unique need to stay in the property. You may request to renew the at-risk Consumer Financial otection Bur You have a reverse mortgage: now your righ and responsibilities Consumer Financial otection Bur You have a reverse mortgage: now your rig