What Happens if the Holder of Your Reverse Mortgage Fails? (loan officer, property tax)

[mwruckman]

We hear a lot about reverse mortgages and how by in effect selling your home back to a financial institution will give seniors financial peace of mind and more income. What happens if the bank or financial company fails? Do the checks keep coming or do they stop and you are out of luck. Who owns your home and if the bank or financial institution is bought out by another company can they assume the mortgage make unilateral changes in the agreement or put a lean on your house? Can they foreclose on the property? Can they demand that you return all the equity as a condition of cancelling the reverse mortgage?

[broadbill]

I think it works just like any other account that the failing financial institution holds/has an interest in....another financial institution will buy up the accounts to administer themselves (and probably for pennies on the dollar).

[bookersnook]

Originally Posted by Revmortgageguru

Reverse mortgages are usually the FHA (federal housing authority) HECM (home equity conversion mortgage). The rules for lenders are strict and protect the senior home owner. Should a lender fail HUD will assign another lender to the loan. You own your home just like any other mortgage. If servicing of the loan transfers to another company the new company can NOT alter the terms of the original agreement. A lender can foreclose but that would most likely be because the senior borrower doesn't live in the house anymore, has failed to pay property taxes or keep the property insured. Just so you know, generally the lender must have HUD's permission to call the loan due. As far as lenders are concerned, I'd recommend you stick with a large credit worthy bank but in any event shop around and consider working with a loan officer specializing in reverse mortgages.

What reverse mortgage bank is not credit worthy?