1.) The home must be debt-free before client can qualify.
A buyer can have an existing mortgage on their home, however, the lien must be paid off prior to, or using the funds from the reverse mortgage at the close. Therefore, there must be enough equity in the home to provide enough calculated funds to satisfy any existing liens.
2.) The bank owns the home.
This is absolutely false. The borrower is never asked to exchange the title of their home for securing a reverse mortgage. This is not a requirement for today’s FHA insured reverse mortgage, as well as FAR‘s proprietary products.
3.) The heirs incurred any outstanding mortgage debt.
Heirs are not responsible for any outstanding debt incurred on the reverse mortgage loan. FHA’s reverse mortgages, as well as FAR‘s proprietary products are all nonrecourse. Meaning, the only recourse the lender has to satisfy. The loan is through the sale or refinance of the subject home after a maturity event occurs such as the sale of property or the borrower passing.
