Surviving spouses of reverse mortgage borrowers now could be better protected against eviction thanks to a rule issued recently by the Federal Housing Administration.
But a new study by the Consumer Financial Protection Bureau underscores that borrowers still can get into trouble with this products due to potentially misleading advertising. Last week, the FHA announced a policy change to potentially allow all spouses of people who enter into reverse mortgages—also known as home equity conversion mortgages (HECMs)—to stay in their homes after the borrowers die, regardless of when the loan was made.
Reverse mortgages let borrowers who are 62 or older get income by tapping the equity in their home. In the past, reverse mortgage contracts required that the loans be repaid upon death of the borrowers. Otherwise, lenders could foreclose. Numerous widows and widowers, some of whom had no idea their spouses had borrowed against their homes, were threatened with eviction when they could not repay the loans.
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