Myth vs. fact
Myth of the week: "The bank takes your house"
Tom Jarboe, NMLS #210600
The short answer
No, the bank doesn't take your house. With a reverse mortgage the title stays in your name, the lender has a lien like any mortgage, and a HECM is non-recourse, so you and your heirs never owe more than the home is worth. But the loan does come due, the balance grows, and you can lose the home if you don't keep up the taxes, insurance, HOA dues and upkeep.
From Tom: Reverse mortgages carry a lot of old fears, and in my view "the public needs to be re-educated on the truth behind them."
Where the myth comes from
Part of it is the word "reverse." People hear that the lender pays you and assume the lender must own the house. Part of it is old stories.
Before HUD's 2014 rule, a younger spouse who wasn't on the loan had far fewer protections when the borrower died, and before the Financial Assessment in 2015, lenders didn't have to check whether a borrower could keep up the taxes and insurance.
Today's rules are stricter. They don't make the loan right for everyone, but the conversation should be about today's rules.
Questions about your own situation?
Talk with Tom Jarboe. He's been helping families with home loans since 1986. You'll get plain answers, and he'll tell you if a reverse mortgage isn't the right fit.
What's true
- You keep the title. The CFPB says it: with a reverse mortgage, the title stays in your name. You can live in the home, sell it or pay off the loan.
- It's a lien, not a deed. Like any mortgage, the lender's lien is paid off when the loan ends.
- It's non-recourse. For a HECM, you and your heirs never owe more than the home is worth. The debt is repaid from the home, not from your heirs' savings.
- Your heirs get choices. They can pay it off and keep the home, sell it, or sign it over. If the balance is more than the home is worth, HUD lets them sell for 95% of the appraised value and owe nothing more.
- You can pay it off any time, with no prepayment penalty.
Private (proprietary) reverse mortgages set their own rules, so ask for them in writing.
The real downsides
Here's the hard part, and I'd rather you hear it from me:
- The balance grows. Interest, mortgage insurance and fees are added to what you owe, so the balance rises over time and your equity shrinks. There may be little left for your heirs.
- The loan comes due. It's due when the last borrower dies, sells, moves out for good (or is away more than 12 months in a row because of illness), or doesn't meet the loan terms.
- The bills are still yours. There's no required monthly mortgage payment, but you must pay property taxes, homeowners insurance and HOA dues, and keep the home in good repair. If those go unpaid, the loan can be called due and the home can be foreclosed. That's the real way people lose a home with a reverse mortgage.
- Others in the home may have to leave. An eligible non-borrowing spouse named in the loan papers can usually stay, as long as HUD's conditions keep being met. Other relatives who live there have no right to stay after the loan comes due.
If you're behind, there's help: a servicer can offer a repayment plan, and a borrower can usually catch up any time before a foreclosure sale. See can you lose your home?
What to do
- Bring the fear that worries you most to me first. Before you can apply for a HECM you must also meet with an independent HUD-approved counselor, and California adds a 7-day wait before a final application or any fees.
- If you're thinking about a reverse mortgage, ask for every cost in writing and a picture of how the balance grows over time.
- Make a yearly plan for property taxes, insurance and upkeep before you sign.
- Bring your family into the conversation, and name your spouse in the loan papers if they won't be a borrower.
- Read 10 myths, the real downsides and the red flags.
FHA insurance on a HECM protects the lender, not you. New American Funding is not acting for HUD, FHA or any government agency.
Sources (read November 3, 2026)show all
- CFPB, "What is a reverse mortgage?" (title stays in your name; the balance grows): https://www.consumerfinance.gov/ask-cfpb/what-is-a-reverse-mortgage-en-224/
- 24 CFR 206.27 (non-recourse; when the loan comes due; obligations), 206.37 (Financial Assessment), 206.55 (eligible non-borrowing spouse), 206.209 (no prepayment penalty), eCFR: https://www.ecfr.gov/current/title-24/subtitle-B/chapter-II/subchapter-B/part-206
- HUD, "Inheriting a Home Secured by an FHA-insured HECM" (heirs' options; 95% of appraised value): https://www.hud.gov/sites/dfiles/SFH/documents/inheriting_hecm_09-23-19.pdf
- HUD Mortgagee Letter 2014-22 (Financial Assessment): https://www.hud.gov/sites/documents/14-22ml.pdf
- HUD Mortgagee Letter 2021-11 (non-borrowing spouse; case numbers on or after Aug. 4, 2014): https://www.hud.gov/sites/dfiles/OCHCO/documents/2021-11hsgml.pdf
- HUD Handbook 4000.1, Part III.B.2.c.ii (repayment plans and catching up): https://www.hud.gov/hud-partners/single-family-handbook-4000-1
- FTC, "Reverse Mortgages": https://consumer.ftc.gov/articles/reverse-mortgages
Free
Reverse Mortgages in California: A Family Guide
I put the key rules from this site into one printable guide for your family: how it works, set-asides, what happens when a parent dies, and the questions to ask. Instant download after you enter your email. No phone number needed.
Tom Jarboe, Regional Sales Manager, New American Funding, NMLS #210600, Diamond Bar.
Questions about your own situation? Talk with me first: (909) 869-6588. Before you can apply for a reverse mortgage, you'll meet with an independent HUD-approved counselor. More notes.