My grandmother recently did a reverse mortgage, how will the recent real estate downfall affect her?

Question

My grandmother recently did a reverse mortgage, how will the recent real estate downfall affect her?

Answer 1

It shouldn't affect her - the contract presumably states a monthly payment amount.

Answer 2

Market conditions do not effect her in any way it only slightly effect the heirs. If she got the FHA reverse the heirs will have minimal effect, for the fact that it is a no recourse loan and it is insured by the united states government. Meaning- If in 10 years the housing market is in turmoil and she suddenly passes, her heirs will only have to pay the amount of what the house can sell for at that time. If the loan is more then the house can be sold for then the government steps in and covers the rest. The loan does not create debt.

Answer 3

Most reverse mortgages are sit up to pay out all the money to your grandmother up front.  She would not have to pay anything back ever unless she moves out into a retirement home or something.  When she dies or moves out the mortgage company wants their money all at once (plus all the compounded interest).  She (or her estate) will have to pay it back or let the mortgage company foreclose.  These are non-recourse loans so they can not go against her or her estate for any shortages.

If the house has lost value it will make it difficult to refinance if you ever want to but it will not affect the contract she has for a "reverse mortgage".