September 28, 2015
We get many questions about FHA HECM loan rules. Some of those questions have to do with the legal rights and/or obligations associated with HECM loans for primary borrowers and what happens to the non-borrowing occupant if the borrower dies (in terms of ownership and occupancy of the property).
Here’s a recent question that showed up in the comments section:
“Several years ago my father and I took out a Reverse Mortgage on our home. He had to be the primary borrower because of his age and I was and still am not 62. I am a co-owner of the house and my name is on the deed. I had to go through the counseling and I had to sign all papers that he signed. My question is when something happens to him will I still be able to live in the house under the same terms?”
Unfortunately this is a question we can’t answer for a simple reason–we don’t know the terms of the loan agreement. And on top of that, there may be different implications for spouses under HECM loans than for other borrowers, so the fact that the reader is a relative but not a spouse may also need additional legal consideration.
In cases where a co-borrower or co-owner has a question about rights, responsibilities, and the disposition of the property should the primary borrower die or become incapacitated, the first step should be to review the terms of the loan agreement.
Next, it’s good to have a discussion with the lender to clear up any questions or misunderstandings about the nature of the HECM loan.
Borrowers who still aren’t sure what the terms of their contract imply for them or co-occupants could also consider getting help from legal counsel with experience in real estate law, especially as it pertains to HECM loans/reverse mortgages.
Terms of the loan agreement, state law, and even changes in federal law (or existing federal guidelines) may all affect a HECM loan. You may also be subject to certain rules and regulations that were designed to take effect after a certain date or for FHA loan case numbers assigned after a certain date.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
Browse by Date: