BiggerPockets

IMO, yes, because the basis of the due on sale is not to guard against an interest rate exposure in the mortgage portfolio, but rather a contractual obligation to live in the home. The reason is more in keeping the property owner occupied, since maintenance and upkeep is generally taken care of by owners, safeguarding the property as opposed to a tenant who has little interest in the property. It's also a requirement for the governmental underwriting and may be covered in the IRC as to the treatment of the annuity income depending on how it is structured. So, IMO, yes, it's not the same thing at all.

Not unless the loan/annuity is in that person's name!

The underlying deal with a reverse mortgage is that the "lender" is really a buyer, they are to take title as the end game, but the heirs and borrower has a right to repay the amounts agreed. They LTV on the "loan" is discounted for a future profit so it's not just a loan that is paid in an annuity form, they don't go through foreclosure. So your deal is cutting them out of the terms agreed to.

I see reverse mortgages as more like the "get your refund right now" deal the tax preparation companies offer. They're not really getting you your refund quick, they're giving you a loan and then keeping your refund when it comes in. A reverse mortgage isn't a mortgage so much as a "deferred sale". You're agreeing to sell your house at some point in the future and getting a loan based on the proceeds of that sale. Since you're already sold the house, its not really yours to sell to someone else.

Great question, Lou.

Great answer, Jon.

Realtyman I just have to disagree with your premise that the banks are screwing seniors with reverse mortgages. For lots of folks, the ONLY significant asset they have is their house. A whole industry makes its living on the "your house is your biggest investment" and "a home is a good investment" myths. If you read some of my other posts I argue a residence is nothing but an expensive doo-dad, same as a car or boat. A house is rarely a "good investment" once you consider the true costs. People say "I bought this house 30 years ago for $100K and now its worth $400K, woo hoo!". They forget they paid $200K in interest on the loan, another $100K in improvements and maintenance over the years, and another $100K in insurance and taxes. Their "investment" is in fact a loser.

Nevertheless, many folks end up being in retirement, have a paid off house and little or nothing in the bank. A reverse mortgage gives them money in their pocket and keeps them in their house. It beats the pants off taking out a normal HELOC, spending the money and then being on the street when they run out of cash. It also beats the heck out of doing cash out refis year after year, spending the money and being 70 years old with no income and a big fat mortgage.

You want to beat someone up, Realtyman, beat up an industry that convinces people to "buy the biggest house they can afford because its your biggest investment". If that's true, you're going to be eating dog food or working a minimum wage job "in retirement". A reverse mortgage, even with all its warts, at least gives you some cash and a roof over your head.