According to my research, reverse mortgages typically do not become
due until the owner permanently moves out of the home. While this
will be specifically defined in your case by the terms of your
father's reverse mortgage, normally this means that the owner has not
continuously lived in the home for a period of one year.
Perpetration of fraud or misrepresentation will cause the loan to
become immediately due, so not informing the reverse mortgage holder
would not be wise. If they found out in less than a year, then the
loan would be due, and your father would have to sell the house even
if he was planning to return to it. You should review the terms of
the loan to find out what the notification requirements are. If he is
able to return home for a period of time after being gone for less
than one year, then usually the loan will not come due until he
returns to a nursing home and remains there continuously for one year.
It is unlikely the nursing home will be able to take possession of the
home. While every state has different rules for Medicaid eligibility,
they typically allow the nursing home resident to retain ownership of
his or her home. In California, for example, if you have provided
care for your father for a period of two years before he enters the
nursing home, that ensures that he will be able to keep the home while
in the nursing home. Based on the expectation that he might be able
to return home within a year, he will most likely qualify to keep his
home for at least that long, even if he is receiving Medicaid
benefits, regardless of his state of residence.
If you desire to keep the home, you would need to be able to pay back
the reverse mortgage amount when it becomes due. Most likely this
would involve you taking out a new mortgage on the home. The reverse
mortgage repayment amount is the lesser of the value of the home at
the time the mortgage is due or the amount owed on the loan.
In conclusion, it is very unlikely that nursing home expenditures will
require the sale of the home for at least a year even if your father
is receiving Medicaid. Depending upon the state, the sale of the home
may never be required to pay for nursing home care. Unless the
reverse mortgage policy is unusual, you should be allowed to remain in
the house until your father has been continuously in the nursing home
for a year provided insurance and tax payments on the home are kept up
and the reverse mortgage company is properly informed of your father's
status according to the loan's terms. If your father is able to
return home in less than a year, even if for only brief periods of
time, that may reset the one-year clock on the reverse mortgage and
extend its due date. Once the mortgage becomes due, you will either
have to sell the house to pay it off or acquire sufficient financing
to pay the lesser of the amount due or the value of the home at that
time.
I hope the following sources give you insight into your situation.
Sincerely,
Wonko
"Debt Limit
The debt you owe on a reverse mortgage equals all the loan advances
you receive (including any you used to finance the loan or to pay off
prior debt), plus all the interest that is added to your loan balance.
If that amount is less than your home is worth when you pay back the
loan, then you (or your estate) keep whatever amount is left over.
But if your rising loan balance ever grows to equal the value of your
home, then your total debt is limited by the value of your home. Put
another way, you can never owe more than what your home is worth at
the time the loan is repaid. The lender may not seek repayment from
your income, your other assets, or from your heirs.
(The technical term for this cap on your debt is a "non-recourse
limit." It means that the lender does not have legal recourse to
anything other than your home's value when seeking repayment of the
loan.)
Repayment
All reverse mortgages are due and payable when the last surviving
borrower dies, sells the home, or permanently moves out of the home.
(Typically, a "permanent move" means that neither you nor any other
co-borrower has lived in your home for one continuous year.)"
"Basic Loan Features" AARP (2005)
http://www.aarp.org/money/revmort/revmort_basics/Articles/a2003-03-21-basicloanfeatures.html
"Can you keep your home?
Absolutely yes. A home is not considered by Medi-Cal to be an asset
which is counted against you for eligibility purposes as long as you
live there. If you become a resident of a nursing home, Medi-Cal does
not count your home as an asset if any one of the following is true:
You are expected to be able to return home (which you can demonstrate
by simply stating this on your Medi-Cal application);
Your spouse lives there;
Your child who is under 21 or is blind or disabled lives there;
A sibling lives there who is part owner of the home and lived with you
for at least a year prior to your entering the nursing home;
An adult child lives there who lived with and provided care for you
for at least two years prior to your entering the nursing home;
You are making a good faith effort to sell your home; or
Your home is a multiple dwelling unit, one which is the principal residence."
"Medi-Cal - California's Health Insurance For Low Income Elderly"
California Registry (2005)
http://www.calregistry.com/resources/medi-cal.htm
"Can keep the primary residence of any value, if:
You are expected to return home after being in the nursing home for a
short time; or
Your child under 21 lives in the house; or
Your adult disabled child lives in the house; or
Your brother or sister who partly owns the house and has lived there
for at least one year before you went into a nursing facility."
"Government Program Limits & Eligibility
for Medicare, Medicaid and Taxes" State of Connecticut (2006)
http://www.opm.state.ct.us/pdpd4/ltc/consumer/Limits.htm
"While each state determines eligibility for Medicaid under its own
rules, in general the person receiving such services may retain just a
very modest amount of personal assets (less than $2,000) and only
about $30 per month in income for personal needs. Certain assets such
as a home, its contents, and one car are exempt. Everything else goes
to the state to pay for the care provided, and that includes any
pension and/or Social Security income."
"Medicare, Medicaid, and Long Term Care" By David Braze, The Motley
Fool (February 07, 2000)
http://www.fool.com/retirement/retireeport/2000/retireeport000207.htm
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