Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Reverse Mortgages: The Good, the Bad and the Ugly

Author: Scarinci Hollenbeck, LLC

Date: October 10, 2013

Key Contacts

Back

Everyone from former U.S. Senator Fred Thompson to actor Robert Wagner is currently pitching reverse mortgages on television. From the advertisements, these financial transactions appear to be a lifesaver for cash-strapped retirees. However, homeowners should understand that reverse mortgages also carry significant risks. 

In basic terms, a reverse mortgage is a special type of loan that allows homeowners to convert a portion of the equity in their home into cash. To apply, homeowners must generally own their home outright or owe little money on an existing mortgage, as well as meet certain age restrictions. Borrowers can elect to receive periodic payments or a lump sum disbursement. They must still pay annual taxes, property insurance, and maintenance or risk default on the mortgage. Most reverse mortgages are non-recourse loans, which means that the lender has cannot pursue any of the borrower’s other assets in the event of default.

Reverse mortgages do not have to be repaid until the home is sold, no longer used as a principal residence, or the borrower defaults on the obligations of the mortgage. At that time, the borrowers must repay all payments, interest, and finance charges. If the borrower dies, the loan must also be repaid, and any remaining equity in the property then passes to the heirs. Any mortgage debt, however, is not transferrable.

While reverse mortgages sound good in theory, they do not always work out as anticipated. In fact, approximately 1 in 10 were in default at the end of 2012.

In addition, many spouses who removed their names from deeds and did not sign mortgage documents in order to meet reverse mortgage age requirements have found themselves facing foreclosure upon the death of their spouses. Lenders claim that the death of the borrower triggers repayment obligations, while the surviving spouses maintain that brokers promised them that they would not be displaced.

The disputes are currently the subject of several lawsuits alleging that lenders failed to comply with the terms of mortgage agreements. The Department of Housing and Urban Development, which insures reverse mortgages, is also facing a suit alleging that agency policies failed to comply with a federal law that specifies that surviving spouses are considered homeowners even if they are not listed on reverse mortgage documents.

The bottom-line is that homeowners should fully consider all of their options before deciding to pursue a reverse mortgage. Like all financial transactions, it carries both risks and rewards.

 If you have any questions about reverse mortgages or would like to discuss the legal issues involved, please contact me, Victor Kinon, or the Scarinci Hollenbeck attorney with whom you work.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Scarinci Hollenbeck Expands NYC Real Estate and Litigation Practices ADDING four litigators post image

Scarinci Hollenbeck Expands NYC Real Estate and Litigation Practices ADDING four litigators

NYC Real Estate and Litigation Attorney Ryan O. Miller and Team Join Scarinci Hollenbeck, LLC New York City, NY – August 13, 2025 – Scarinci Hollenbeck, LLC has strengthened its Real Estate and Litigation practices with the addition of four New York City-based attorneys. Ryan Miller, who joins as a partner, is well known for […]

Author: Scarinci Hollenbeck, LLC

Link to post with title - "Scarinci Hollenbeck Expands NYC Real Estate and Litigation Practices ADDING four litigators"
What is Business Law and Why Is it Important? post image

What is Business Law and Why Is it Important?

Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]

Author: Dan Brecher

Link to post with title - "What is Business Law and Why Is it Important?"
Corporate Transactions: Best Practices for Successful Deals post image

Corporate Transactions: Best Practices for Successful Deals

Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]

Author: Dan Brecher

Link to post with title - "Corporate Transactions: Best Practices for Successful Deals"
How to Conduct a Fair and Legal Employee Termination in 2025 post image

How to Conduct a Fair and Legal Employee Termination in 2025

Ongoing economic uncertainty is forcing many companies to make tough decisions, which includes lowering staff levels. The legal landscape on both the state and federal level also continues to evolve, especially with significant changes to the priorities of the Equal Employment Opportunity Commission (“EEOC”) under the Trump Administration. Terminating an employee is one of the […]

Author: Angela A. Turiano

Link to post with title - "How to Conduct a Fair and Legal Employee Termination in 2025"
Admin Dissolution for Annual Report: What You Need to Know post image

Admin Dissolution for Annual Report: What You Need to Know

While filing annual reports may seem like a nuisance, failing to do so can have significant ramifications. These include fines, reputational harm, and interruption of your business operations. In basic terms, “admin dissolution for annual report” means that a company is dissolved by the government. This happens because it failed to submit its annual report […]

Author: Dan Brecher

Link to post with title - "Admin Dissolution for Annual Report: What You Need to Know"
What Is Antitrust Litigation Law? post image

What Is Antitrust Litigation Law?

Antitrust laws are designed to ensure that businesses compete fairly. There are three federal antitrust laws that businesses must navigate. These include the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. States also have their own antitrust regimes. These may vary from federal regulations. Understanding antitrust litigation helps businesses navigate these complex […]

Author: Robert E. Levy

Link to post with title - "What Is Antitrust Litigation Law?"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. You can reply STOP to opt-out of further messaging.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!