Implications Of Failed Reverse Mortgage On Retirees


The reverse mortgage concept started as far back as 1990, when seniors who were 62 years and above could tap into their home equity and get some amount of money in exchange for their home value. The borrower does not have to make a monthly payment of the loan. The only reason the loan can be paid back is when the borrower moves out of the house or dies.


The intention of the federal government for implementing this strategy in the first place was to make it easier for retirees to live out their days without having to worry about a place to rest their heads. However, this is no longer the case as several retirees are losing their homes by the day for several reasons, including failure to keep up with insurance payments and taxes.

According to statistics from the U.S. Department of Housing and Urban Development, about 15,000 out of the 85,000 retirees on a reverse mortgage might be losing their homes soon. Also, the USA TODAY reports that between 2012 and 2017, over 16,600 reverse mortgage holders already lost their homes to foreclosure, the highest population being in California.


There have been various reasons for these foreclosures, order than the obvious rising taxes and insurance costs; some homeowners have lost their homes because their deceased spouses were the ones who got the reverse mortgage and could not payback. For some others, the lenders complained of the lender living too long, and because they could no longer cope with this, they had to implement the foreclosure.
On the government’s path, this is also becoming a big issue because the loan is federally insured. This means that the government must bear the differences between the value of the foreclosed home and what is owed on the mortgage.

According to the statistics from the Federal Housing Administration report to Congress, this default in payment has greatly affected the Mutual Mortgage Insurance Fund. In 2018, the government had to pay about $15.75 billion out of the $2.11 billion of the insurance fund, causing the government to fall into a depth of over $12 billion.

Some of the foreclosures were unwarranted and has been fought for by legal authorities. For instance, some lenders will ask the homeowner to prove that they are still residing in the house. This is usually not in the initial agreement.

Some other lenders can claim that the homeowner has moved out of the house or have not even been living in it for a long time. This is also not true in some cases as lenders only use this strategy to end the contract and get their money back from the homeowner or the government.


Although the reverse mortgage implemented was created to assist senior citizens to get additional revenue that they can use to keep up after they retire, it is becoming difficult to keep up with this, causing most of them to suffer instead. Therefore, retirees should review the process carefully and only take the reverse mortgage option if they have limited options.


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