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Big Gotcha Revealed in Some Reverse Mortgages
Old 03-11-2011, 10:16 AM   #1
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Big Gotcha Revealed in Some Reverse Mortgages

http://www.nytimes.com/2011/03/09/bu...e&ref=business

If one person only signs mortgage, and that person dies, the remaining spouse may have to leave or pay up.

Ha
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Old 03-11-2011, 10:31 AM   #2
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Quote:
Originally Posted by haha View Post
If one person only signs mortgage, and that person dies, the remaining spouse may have to leave or pay up.
When MIL got her reverse mortgage last year, I remember that this point was explicitly made to her. She even had to sign a document stating as much at closing (I was there with her, in charge of reading the legalese).
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Old 03-11-2011, 11:48 AM   #3
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The two most important questions when considering something like this are:

1. "What happens if [insert all the scenarios you can think of]?"
and
2. "Can you show me where that's specifically mentioned here?"
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Old 03-11-2011, 04:51 PM   #4
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Actually if you think about it the reverse mortgage is a strange sort of annuity. In an annuity typically payments are based upon your age for a lifetime annuity. A joint and survivor annuity pays less than a single life one, the difference depending on both parties ages. In the same sense the person making the mortgage essentially is taking the same bet as the insurance company that you will die before the average. If you add two lives that average time is extended. Thus the amount received is lower. I would hope the procedure outlined in FD's post is followed, one might also make the spouse whose name is not on the reverse mortgage sign and acknowledgment of the implications of only one signing. If people don't read what they sign then the sort of deserve what they get what FD did should be done more often, why don't the community service organizations provide this service? Or perhaps furnish the docs a few days early for reading without being under the time pressure of a closing.
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Old 03-12-2011, 04:25 PM   #5
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Quote:
Originally Posted by haha View Post
http://www.nytimes.com/2011/03/09/bu...e&ref=business

If one person only signs mortgage, and that person dies, the remaining spouse may have to leave or pay up.

Ha
Makes sense.

But I can see the advantage to the lender of glossing over this little fact. If only one person signs, they have a 50% chance of getting "repaid" sooner. Perhaps much sooner. If they can get the man to sign, they have a better than 50% chance of early repayment.
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Old 03-12-2011, 09:57 PM   #6
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Quote:
Originally Posted by meierlde View Post
Actually if you think about it the reverse mortgage is a strange sort of annuity. In an annuity typically payments are based upon your age for a lifetime annuity. A joint and survivor annuity pays less than a single life one, the difference depending on both parties ages. In the same sense the person making the mortgage essentially is taking the same bet as the insurance company that you will die before the average. If you add two lives that average time is extended. Thus the amount received is lower. I would hope the procedure outlined in FD's post is followed, one might also make the spouse whose name is not on the reverse mortgage sign and acknowledgment of the implications of only one signing. If people don't read what they sign then the sort of deserve what they get what FD did should be done more often, why don't the community service organizations provide this service? Or perhaps furnish the docs a few days early for reading without being under the time pressure of a closing.
Oh sure, it is actuarially sound. But really, expecting some old and relatively poor person to know this is dishonest and exploitive, as is much of what the life insurance industry does. It is their preferred business model.

Ha
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Old 03-12-2011, 10:38 PM   #7
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I looked into this for my brother last year. The fees are extremely high, but I can imagine a reverse mortgage could be ideal for a very select group of homeowners. There are private loans and HUD regulated loans. The private loans are totally out of the question IMO. The lenders do require that the homeowner take a "counseling session" and some even encourage the homeowner to bring a family member. I believe this is more for the lender's protection (e.g. CYA) than the borrower.

If husband and wife are joint tenants, only having one spouse sign the loan breaks the tenentcy as is the case with any real estate loan, but I doubt that fact is disclosed and HUD apparently changed thier policy to allow the non-signing spouse to stay in the home.
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