Holding Title When Doing a Reverse Mortgage
Holding title individually or as joint tenants is rarely a problem with a reverse mortgage. All owners must be age 62 or older. If there is someone younger than 62 on title (such as an adult child), they can usually be removed at close of escrow. (Effective August 4, 2014, spouses under the age of 62 can now be on the loan and on title.)
Occasionally there can be a problem revealed during the title search causing an issue that wasn't anticipated. These can usually be fixed during the processing period but, at times there may be no fix.
Other forms of holding title can be used but anytime you get past the simple individual and joint ownership, it is time to slow down and ask questions to make sure there aren't any anticipated concerns. Even though all seems normal, it is possible that underwriting will see something that causes concern.
Trusts are also allowed in a reverse mortgage. The trust must be revocable. Sometimes a revocable trust can become irrevocable upon the death of one of the trustors. There may also be clauses in a trust that are not acceptable in the HECM Reverse Mortgage. In some cases, the lender's underwriting group may determine a particular trust is not acceptable. In other cases, the lender defers to the title company's judgment as to the acceptability of the trust. At times, an unacceptable trust can be rewritten to comply and then be accepted. For a relatively simple reverse mortgage, the trust adds a level of uncertainty prior to completion of the loan.
Life Estates are also allowed in a reverse mortgage. In a Life Estate, it is typical that the person living in the home does not own the home. However, they are allowed to live in the home for the rest of their life. A typical example might be a husband and wife in a second marriage. The husband owned the home prior to this marriage. In his will, he designated that his current wife should be allowed to live in the home for the rest of her life. On her death, the home would then go to his children by a prior marriage. In this case, the wife would have a Life Estate. His children would be the owners. Typically, the children would have to give their permission for their step-mother to do a reverse mortgage since their inheritance would be reduced by the use of the reverse mortgage.