Reverse Mortgage Puerto Rico: What You Need to Know

In Puerto Rico, you can use a reverse mortgage to tap into your home's equity, but it's essential to understand the process and requirements.

You must be at least 62 years old and own your home outright or have a low balance on your mortgage to qualify.

A reverse mortgage allows you to borrow money using your home as collateral, and you won't have to make monthly payments.

You can use the funds from a reverse mortgage for any purpose, such as paying off debts, covering living expenses, or financing home repairs.

Reverse mortgages are a type of financial instrument designed for seniors, allowing them to access the equity in their home.

They consist of non-repayable loans that are secured by the homeowner's property, unlike traditional loans.

The money received can be used as the homeowner sees fit, such as paying off debts, medical bills, or home renovations.

You can receive the money in three ways: a single payment for the total equity, monthly payments for a set amount and time, or a line of credit that can be accessed as needed.

Here are the three forms of reverse mortgages you should consider:

A reverse mortgage can be a useful tool for retirees in Puerto Rico, providing a source of living expenses or a way to buy a vacation home. You can take out a reverse mortgage on a property in Puerto Rico, the U.S. Virgin Islands, or Guam.

To be eligible, you'll need to be aware of the residency rules that apply to reverse mortgages. Breaking these rules could lead your lender to foreclose on your loan. Consider a cash-out refinance, home equity loan, or home equity line of credit (HELOC) as an alternative to a reverse mortgage to provide you with more access to home equity.

You can receive the money from a reverse mortgage in one of three ways: a single payment for the total equity, monthly payments for a set amount and time, or a line of credit that you can access when needed. This can be a great option for retirees who want to supplement their income or pay for expenses without having to make monthly payments.

Here are some key things to keep in mind when considering a reverse mortgage in Puerto Rico:

Reverse mortgages in Puerto Rico have been available for decades, but their popularity has declined in recent years due to a surge in foreclosures.

The high rate of foreclosure on reverse mortgages in Puerto Rico is a major concern, with many seniors losing their homes as a result.

In an effort to address this issue, HUD has implemented new financial requirements for seniors, including lowering the amount that can be borrowed and adding mandatory set-asides nationwide.

As a result, some of Puerto Rico's seniors can now borrow a maximum of $15,000 on their $100,000 home, making the product less appealing for many.

Moneyhouse, a company that used to average 50 to 60 reverse mortgage loans a month, has seen a significant decline in business, closing only four loans in the first quarter of this year.

Here are some key differences between reverse mortgages in Puerto Rico and other states:

These differences have made it more challenging for HUD to implement policies that work for Puerto Rico's seniors.

Despite the challenges, some companies are still using bilingual U.S.-based servicers to try and make the process more accessible to seniors.

Hurricane Maria had a devastating impact on Puerto Rico, particularly for seniors who had taken out reverse mortgages.

The storm damaged over 472,000 homes in 2017, making it difficult for homeowners to meet the insurance requirement of their reverse mortgage loans.

Many seniors, like María Isabel Menéndez Soto, found themselves in trouble with their insurance requirements after the hurricane.

María Isabel Menéndez Soto's home was damaged during the hurricane, but it was the reverse mortgage that nearly led to her eviction.

The Federal Housing Authority issued a foreclosure moratorium for hurricane victims in 2017, but it expired in 2018.

Wall Street investors and banks started filing foreclosure claims almost immediately, leaving many seniors like María Isabel Menéndez Soto in a precarious situation.

The foreclosure proceedings were frozen during the moratorium, but they resumed in September 2018, catching María Isabel Menéndez Soto off guard.

She received a 10-day eviction notice and was forced to seek the help of a lawyer to untangle the situation.

The foreclosure was triggered by an allegation that María Isabel Menéndez Soto was behind on her hazard insurance, but her lawyer was able to prove that she had correctly paid for her insurance.

The complexity of the situation is often due to the fact that lenders have sold off their mortgages to U.S.-based financial institutions, leading to communication barriers and lack of documents or evidence.

This can lead to a revolving cast of names holding borrowers' paperwork, making it difficult for seniors to navigate the system.

Records show that many current reverse mortgage loans on the island included the projection that home values would rise about 6% a year, but instead, they have slid by about 4%.

This decline in home values has added to the financial burden of seniors who are already struggling to make ends meet.

In Puerto Rico, loan companies are regulated by the Office of the Commissioner of Financial Institutions.

The Office of the Commissioner of Financial Institutions requires loan companies to be licensed and registered with the agency.

Loan companies in Puerto Rico must also comply with the island's usury laws, which cap interest rates on loans.

The Puerto Rico usury law limits interest rates to 24% per annum.

Loan companies must also provide clear and transparent disclosures to borrowers about the terms and conditions of the loan.

Borrowers have the right to cancel a loan within three days of signing the loan agreement.

Puerto Rico is part of the United States, which means it's possible to take out a federally insured reverse mortgage there.

You can use a reverse mortgage on a vacation property in Puerto Rico if you want to move there permanently, providing a reliable source of income in retirement.

To qualify for a reverse mortgage, the property must be your principal residence, meaning you spend the majority of the year there.

Puerto Rico is not the only US territory where you can take out a reverse mortgage. Puerto Rico, the U.S. Virgin Islands, and Guam are all part of the United States and are covered by the U.S. Department of Housing and Urban Development (HUD).

You can find lenders in these territories to provide you with a federally insured reverse mortgage. This can be a great option for retirees who own a vacation property in one of these places and want to move there permanently.

To qualify for a reverse mortgage, your property must be your principal residence, meaning you spend the majority of the year there. This is why you can't have two reverse mortgages at the same time.

Puerto Rico has been dealing with a high rate of foreclosure on reverse mortgages, with many seniors losing their homes as a result. This has led to a crisis for seniors on the island.

The issue is compounded by the complex and often confusing nature of reverse mortgage paperwork, which can lead to errors and misunderstandings. For example, a small mistake of just $1.00 in the repayment to the bank can trigger a foreclosure.

HUD has responded to the crisis by providing resources to homeowners under foreclosure, but more needs to be done to protect seniors from financial calamity. One possible solution is for seniors to be more aware of the risks and to take steps to mitigate them, such as by keeping a close eye on their paperwork and being aware of any changes to their loan terms.

Unfortunately, the system is often stacked against seniors, with institutions prioritizing profits over people. As one commenter noted, "Es un abuso, una usura de la peor calaña que cometen con las personas mayores en los reverse mortage" ("It's an abuse, a usury of the worst kind that they commit against older people in reverse mortgages").

In Puerto Rico, reverse mortgages have been available for decades, but the island's unique situation has created a perfect storm of problems. Language barriers, the aftermath of Hurricane Maria, and a complex financial system have all contributed to the crisis.

Here are some key statistics on the problem:

In addition to the statistics, it's worth noting that the problem is not just limited to Puerto Rico. The McGraw Center for Business Journalism has produced a report on the issue, which highlights the problems faced by African American and Latinx seniors on the mainland.

In Puerto Rico, the question of when to pay a reverse mortgage is a bit complex. You'll need to be aware of the potential consequences of not paying the loan back.

If the housing market value has decreased significantly due to a crisis, the debt may be higher than the property's value. In this case, you'll need to pay the full balance of the loan when it becomes due.

You're not off the hook just because you're not the one who took out the loan. If you're in a marriage or domestic partnership and the property is owned by one partner, the other partner can still be held responsible for paying the loan if the owner passes away.

If you fail to make payments or comply with the loan terms, the financial institution can stop making payments or close the credit line, making the loan due and payable.