Reverse Mortgage and Lender Responsibilities

Today’s reverse mortgages were created to include many features that protect seniors from reverse mortgage fraud unscrupulous lenders who wish to scam or prey on seniors. In many cases, seniors aren’t aware that they are granted numerous rights and protections when entering the lending and borrowing arena.

Consumer safeguards are in place to regulate the reverse mortgage industry and protect the interests of senior citizens and their families. One of these consumer safeguards is mandatory reverse mortgage counseling sessions. The FHA requires counseling sessions to inform older homeowners on their options when opening a reverse mortgage account, as well as identifying specific borrower responsibilities throughout the life of the loan.

Lenders also have many responsibilities when originating a reverse mortgage loan, as well as continued lender responsibilities designed to maintain the integrity of the loan. These responsibilities include:

• A reverse mortgage lender must give the borrower a statement prepared by the local or county office on available independent counseling and information services.
• The lender must also give the borrower a description of the relevant features of the reverse mortgage being offered. This should include the following information:
o The interest rate to be charged and whether the rate is fixed, variable or both;
o Interest accrues from the time monies are advanced to the borrower and the interest is compounded;
o All reverse mortgage fees and costs that must be paid by the borrower;
o A description of any refinancing features that have been discussed with the borrower;
o Any events that could terminate the reverse mortgage such as death or moving from the residence;
o A description of any shared appreciation or equity participation features; and
o A toll-free telephone number and the name of a contact person who can answer any questions, comments or complaints that the borrower may have. If there is no toll-free telephone number, the lender must accept collect calls.
When the borrower understands the reverse mortgage lender’s responsibilities, the reverse mortgage application process becomes less confusing. Educated borrowers are also better able to spot any immoral practices by the lender, who may have assumed that the older borrowers do not know or understand their rights.