One of the most important consumer safeguards of reverese mortgage loans is that they are non-recourse debt. This means only the value of the home may serve as collateral, and other personal assets cannot be seized if the house value is not sufficient to pay off the loan. In seeking repayment, the lender does not have recourse to anything other than the home’s value.

1) Even if the loan balance grows to be greater than the home’s future value, the borrower’s debt is limited by the value of the home.

2) The non-recourse feature protects the borrower and the borrower’s estate and heirs from “deficiency judgments,” that is, from being required to pay back more than the home’s value.

As examples, a borrower could outlive the expected life of the loan, continue to receive payments under the mortgage, and incur a loan balance well beyond the value of the home. Or, due to poor economic conditions, the value of the home may plummet since the time the loan was taken out. Regardless, the lender will not be able to collect the overage from the mortgagor, estate or heirs.

A Few More Related Articles of Interest:

All About Reverse Mortgages

Reverse Mortgages and the Housing Bubble

Reverse Mortgage Pro and Cons

Is Your Community Reverse Mortgage Friendly?

How secure is your pension program?