Can you do a reverse mortgage when home's in a trust?

Can you do a reverse mortgage when home's in a trust?
Guest Column
Date Published: October 19, 2007

Dear Elaine,
My home is in a trust, do I have to take it out of the trust to do a reverse mortgage?

- Wendy

Dear Wendy,
The Department of Housing and Urban Development (HUD) has requirements and guidelines regarding this issue. Basically, the beneficiary of the trust can not be younger than 62 or that individual must sign off as beneficiary of the trust. This is why it is necessary to give a complete copy of the trust to title for review.
Dear Elaine,
I have a reverse mortgage which my wife is not included. My wife just turned 62. Can I just add her to the loan, if not, how do we get her on the loan?

- John

Dear John,
The answer is no to the first part of your question. Reverse mortgages are not assumable. Your wife would had to of been on the original reverse mortgage contract which was first secured. I understand that since she was not 62 you were not able to do that.
Remember, the amount which you are entitled is determined by the age of the youngest person on the loan (62 or older), the appraised value of your home and the county in which you live.
For example, if you are 68 and she is 61 she would have had to grant deed the property to you in order for you to secure a reverse mortgage at that time. The amount which you received would have been determined on your age of 68. In essence, you received more money than if she was on there with her age of 62. Age is a major factor in the calculation.
The only way to get her on the reverse mortgage loan and title would be to refinance your loan. This may have a negative impact in two ways. One is the cost to refinance and second is the possibility that the loan may not allow you as much money, depending on the value of your home, since she is younger.
It is not like a forward mortgage where frequently one simply adds the other person to the title after the closing.
Another alternative is that upon your passing, she can then refinance into another reverse mortgage. Remember, the amount you secure is based on your age and the value of your home. As she gets older and your home appreciates, she will be entitled to more.
Your questions are welcomed. We will publish the answers. If there is a question on your mind, you can be sure someone else may be wondering about the same thing. So, don't hesitate to ask.
Elaine Albright is owner of Pension Plus Mortgage and a member of AARP and the National Reverse Mortgage Lenders Association (NRMLA). If you have any questions, Albright can be reached at elainealbright@yahoo.com or call (530) 823-3363.