Survey reveals a missed opportunity for HECM acceptance

Survey takeaways

1. Two percent said they already have a reverse mortgage or plan to get one in the coming year.
2. 74% of respondents say they have little or no knowledge about reverse mortgages.
3. Of the remaining twenty-plus percent who say they are somewhat knowledgeable 40% believe their heirs would not be able to inherit the home. What they don’t know is any remaining equity in the property after the death of the last borrower would be available to the heirs or the estate to do with as they see fit.
4. 22% believe that when you get a reverse mortgage you basically sign over the house to the bank or the lender.

This is perhaps one of the most common and persistent reverse mortgage myths that has lived on for over 30 years which we shall address as the first of the four most common found in the survey responses.

Common myths persist

The second myth is that the heirs are left with the financial burden or debt of a reverse mortgage. What’s overlooked and misunderstood is the HECM’s unique and nearly unparalleled ‘non-recourse’ provision. Heirs are in fact not obligated to repay the reverse mortgage unless they wish to purchase the home to assume ownership. The third myth is perhaps more of a misunderstanding and it’s that the borrower has to leave the home before they’re finished using it. On its face that’s certainly a myth. However, if the borrower violates the terms of the loan such as not paying property taxes, insurance, or other required property charges they would likely have the loan called due and payable. Another possibility is if the last surviving borrower or non-borrowing spouse goes into long-term care and no longer occupies the property. The fourth myth is a real head-scratcher- monthly payments are required. Perhaps this myth can be attributed to the fact that reverse mortgages are counterintuitive to the general public who is conditioned that mortgages in general require monthly payments lest you get foreclosed upon. One survey respondent says, “Based on what I’ve heard, my monthly mortgage payments would be paid by someone else, and I would continue to be able to live in the home. They would own the home if I died; the home would no longer be mine,” this respondent said.

Conclusion

What the survey reveals is this. Despite years of television ads and celebrity spokespersons, increased marketing and educational efforts, and publications from HUD and other agencies, a wide swath of the American public is generally uninformed or unaware of how a reverse mortgage works and what it could potentially do for them.  The fields are ripe for education to dispel the myths and innuendo about one of the most unique and versatile mortgage loans in the United States.

Resources:

Mutual of Omaha Survey:
Are Reverse Mortgages Misunderstood? (Mutual of Omaha Survey)