Wednesday, September 5, 2012

Do both the husband and wife need to be on the reverse mortgage loan??

Distressed SeniorAs a reverse mortgage loan officer I make a commission based on the loan amount when the loan closes and funds, so the higher the loan amount the more money I make.  Sounds good right?  I recently ran across two different couples who are now having issues with their reverse mortgages because some greedy loan officer decided to make more money instead of do what is best for the customer.  So in answer to the title question...YES you do not need to have both the husband and wife on the reverse mortgage loan.  BUT there are some risks to this, so read on to learn more!

The first couple I met with got a reverse mortgage about 3 years ago.  At the time the husband was 64 years old and the wife was 61, but would be turning 62 in 3 months.  Instead of waiting until they both were 62 the loan officer pushed them into doing the loan in just the husbands name only.  At the time the loan officer probably said you need to do this now, you never know what home values will be like in 3 months, or what rates will do; all the while thinking to himself I want to get paid now instead of in 3 months.  This is unfortunate because now the couple came to me to add the wife onto the loan (she is now 65), but because they didn't wait 3 months back then, this will now cost them over $20,000 now because the value of their house has dropped since then and they have accrued interest over the past 3 years.  I did not do the loan for this couple although they really considered pulling the money out of their retirement account to make the deal work.  I advised them to talk to their financial planner instead and use a portion of the money they were going to have to bring in to do the reverse mortgage to buy a life insurance policy to cover the difference if the husband passes away prematurely.  I feel bad for this couple, and I hope the loan officer they worked with 3 years ago is not in this business anymore.

The second couple I am working currently with had the exact same thing happen to them only at the time they did the original reverse mortgage, both spouses were old enough to do the loan, but the loan officer at the time again was greedy and only put the loan if the husbands name because he is 12 years older so the loan amount would be bigger so he could make a higher commission.  This couple is in a bad spot now because the husband is being forced to move into a long term care facility because he has early Alzheimer's, so a life insurance policy will not help.  In this situation, the wife is not on the loan and is going to loose the house because the husband has moved out and will not be coming back.  The families estate attorney found me via this blog and my reverse mortgage website and I am now in the process of refinancing the loan for this couple and adding the wife to it.  The situation is the same as the first couple and she is going to have to bring in a large amount of money to to add herself to the loan, but for her, that is better than moving.

Bottom line is; if you are considering a reverse mortgage and your loan officer is counseling you to only have one spouse on the loan YOU NEED TO GET A SECOND OPINION!  There are situations where this is the only option and that is OK, but before you go ahead, think about the long term consequences.  If you are in need of a second opinion, call our company at 1-800-431-9250 and we will be happy to give you all your options, even if you don't use us for the loan.

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