Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: October 10, 2013
The Firm
201-896-4100 info@sh-law.comEveryone 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.
Since his inauguration two months ago, Donald Trump’s administration and the Congress it controls have indicated important upcoming policy changes. These changes will impact financial services policies and priorities. The changes will particularly affect cryptocurrency, as well as banking rules and regulations. Key Regulatory Changes in Cryptocurrency For example, in the burgeoning cryptocurrency business environment, […]
Author: Dan Brecher
The retail sector has experienced a wave of bankruptcy filings over the last year. Brick-and-mortar businesses in financial distress include big-name brands like Big Lots, Party City, The Container Store, and Vitamin Shoppe. When large retailers seek bankruptcy protection, they are not the only businesses impacted. Landlords can be particularly hard hit. While commercial landlords […]
Author: Brian D. Spector
The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]
Author: Brian D. Spector
In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]
Author: Kenneth C. Oh
On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]
Author: Matthew F. Mimnaugh
If you purchase real property from a foreign person or entity, you may be required to withhold taxes from your payment to the seller under the Foreign Investment in Real Property Tax Act (FIRPTA). The federal tax law is designed to ensure that foreign sellers pay any applicable capital gains tax on profits realized from […]
Author: Jesse M. Dimitro
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
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!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!