On October 17, NRMLA President and CEO Peter Bell submitted the following Letter to the Editor to Forbes.com and to contributing writer Tara Mastroeni, who published an article two days earlier filled with misleading and erroneous information about reverse mortgages.
To the Editor:
The article posted on the Forbes website on October 15 titled “5 Times Reverse Mortgages Are a Bad Idea” by contributor Tara Mastroeni is fraught with errors and misinformation in the “scenarios” described. Some examples:
Mastroeni writes, “If the older spouse passes first, and he or she was the only one on the loan, the surviving spouse could face being put out of the home by foreclosure.” In 2014, the Department of Housing and Urban Development updated regulations to permit non-borrowing spouses to remain in the home after the passing of the older spouse. Borrowers are required to be 62 years old and some spouses are therefore not eligible to be included in the loans. This protects them.
Mastroeni warns heirs to be aware that “…repayment of the loan happens as soon as the loan holder dies.” This is incorrect. Repayment is not immediate. Upon death of the last spouse, the heirs may refinance or payoff the loan balance or they have six months to sell the home and HUD generally approves two three-month extensions for a total of one year without repayment obligation in the interim.
Mastroeni writes that when the last borrower passes the children “have to choose between pulling funds together to pay off the entire loan or letting the house be foreclosed upon.” This is also incorrect. A reverse mortgage is a non-recourse loan. Most heirs would sell the home in a non-recourse transaction, which means the heirs are protected from having to pay off more than the sale value of the home if the loan balance exceeds it.
Mastroeni seems unfamiliar with non-borrowing spouse policy and the mechanics of a non-recourse loan as well as the fact that most fees are generally rolled into the loan rather than paid from “disposable income.” There is also a confusing passing reference to “making payments,” that may make a reader think they would have to make payments on a reverse mortgage loan—which they do not.
In a time when so many older Americans continue to struggle to fund their retirement, it is a disservice to provide false information on one of the few support options available. Therefore, on behalf of the members of the National Reverse Mortgage Lenders Association, I request that Forbes publish corrections. We would be glad to review all the errors with you scenario-by-scenario.
President & CEO, National Reverse Mortgage Lenders Association