San Antonio, Texas (210) 826-1122
Bellevue, Washington (425) 296-2919



PAUL PREMACK, JD, CELA*
8031 Broadway
San Antonio, TX 78209
*Licensed in Texas
BENJAMIN PREMACK, JD** 
11900 NE 1st Street
Bellevue, WA  98005
**Licensed in Washington State & Colorado


San Antonio Probate, San Antonio Estate Planning, San Antonio Elder Law

 

San Antonio Express-News
September 22, 2000

Reverse Mortgage Counseling

© 1989-2004, Paul Premack

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Dear Mr. Premack: I understand that it is legal in Texas now to do a reverse mortgage. Can you tell us how such a mortgage works legally? I understand that before a reverse mortgage can be taken out, the homeowner needs to have financial counseling. Who does that type of counseling? Thanks – G.A. via Email

Reverse Mortgages are often of greatest interest to Seniors who have extensive equity in their homes. They allow monthly payments to be made from the lender to the homeowner, and are typically on between 30-50% of the total home equity. The owner can spend the money for any purpose. The loan must, of course, be repaid – but not until either:

1. All of the borrowers (both husband and wife) have died; or

2. The homestead property securing the loan is sold or otherwise transferred; or

3. All borrowers cease occupying the homestead property as a principal residence for more than 12 consecutive months without prior written approval of the lender; or

4. The borrower defaults on the loan by failing to pay property taxes or by failing to keep the property insured.

The 1997 law, which was the first Texas law to allow reverse mortgages, made them available to any Texan age 55 or older. In 1999, the legislature changed the law to conform to federal regulations, so currently only those age 62 or older (or those whose spouse is 62 or older) can apply for a Texas reverse mortgage. In addition, these rules must be followed:

Ø The reverse mortgage lien must be voluntary and both spouses must sign it. It is not possible for only one spouse, acting alone, to place a lien against the homestead unless that spouse either a) has a Durable Power of Attorney from the other, or b) is the court-appointed Guardian of the other.

Ø The loan must be without recourse for personal liability against each owner. The lender can only recover its funds by foreclosing on the home.

Ø If the lender doesn’t live up to its end – it fails to make loan advances as contracted and doesn’t cure its default as required in the loan contract – then the lender forfeits all principal and interest of the reverse mortgage.

The Texas constitution further requires that before signing a reverse mortgage, the owner must attest in writing that he or she received counseling on the advisability and availability of reverse mortgages. The counseling must include a discussion of other financial alternatives. You can call on your attorney (and yes, I am available to help) or call on your financial planner to receive the required financial counseling.

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Disclaimer: This column answers a specific legal question offered by an individual in the South Texas area. The answer may or may not match your individual situation. Be careful not to treat this column as specific legal advice that meets your individual needs. It may give you a solid basis for discussion with your own attorney. Also, please be aware that laws change. You should consult with your personal attorney before you take any action on this or any legal issue.

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