The short answer: yes, you can.
Both FHA Home Equity Conversion Mortgages (HECMs) and proprietary (jumbo) reverse mortgages allow homes held in a trust to qualify. This includes revocable (living) trusts and, in some cases, irrevocable trusts. But there is one important step: the lender’s attorney must review the entire trust document, including all amendments, to make sure it complies with HUD, investor, and title insurance requirements.
Why Lenders Need the Full Trust Document (Not Just the Certificate of Trust)
Here are the reasons lenders ask for the entire trust document, all amendments, and all sections, instead of relying on just a summary or certificate:
- Confirming Borrowing Authority: Lender needs to verify that the trustee has the legal power to borrow money and use the property as collateral. The certificate often doesn’t include the full scope of these powers.
- Reviewing Amendments: Trusts are often amended over time, which can change key terms, trustee authority, or revocability. The Lenders need to review all amendments to ensure we’re working with the current, controlling version.
- Review Trust Structure: Reverse mortgages are generally designed for revocable trusts, but some irrevocable trusts may also qualify if they contain specific language that meets program requirements. The full trust document is necessary to confirm this, especially if amendments have changed the original terms.
- Identifying Successor Provisions: We must understand what happens if a trustee dies or becomes incapacitated, as this affects long-term servicing and loan repayment.
- Checking for Restrictive Clauses: Clauses such as spendthrift provisions, co-trustee approvals, restrictions on encumbrance, or limits on borrowing can interfere with the reverse mortgage. These are rarely visible in a short-form certificate.
- Meeting Lender and Title Requirements: Reverse mortgage lenders are bound by HUD, FHA, investor standards, and title insurers. A full review ensures the trust does not interfere with insurability or enforceability.
Doing a Trust After Establishing a Reverse Mortgage
What if you already have a reverse mortgage and later decide to place your home into a trust? Both FHA HECMs and proprietary reverse mortgages allow this.
That said, in my experience it is better to secure trust approval before closing on the reverse mortgage, or at least get approval for the trust template your attorney plans to use. Most estate attorneys work from a standard template. Having that reviewed by the lender ahead of time avoids unnecessary surprises, such as restrictive clauses or missing trustee powers that could interfere with the loan.
If you wait until after the reverse mortgage is in place, the lender will still need to review the trust language before allowing the property transfer. This can be done, but it may involve more steps and delay.
Practical Tips
Send the full trust early
Provide the complete document to the lender so their legal team can confirm eligibility before title changes or deed work is done.If the trust does not qualify
Options may include amending the trust or, in some cases, transferring the property out of the trust. Both steps carry legal and tax implications, so professional guidance is important.Work with an experienced attorney
Choose someone familiar with both trusts and reverse mortgages to ensure the language works for estate planning and loan requirements.
Final Thoughts
Yes, a reverse mortgage can be done if your home is in a trust, and you can also place your home into a trust after getting a reverse mortgage. Both FHA HECMs and proprietary reverse mortgages allow for this. The key is timing and language. Having the trust reviewed and approved early can prevent complications and give you peace of mind that both your estate planning and financing goals are protected.
What to Do When You Have a Client or a Case?
- Go to www.HousingWealthPro.com and request a Housing Wealth Illustration. Give Details in the “Notes” Section including the clients’ phone # if they would like a Housing Wealth Assessment. You can also
- Schedule a Time to Speak with Me: Click Here
Related Articles:
- Fifteen Little-Known Things Your Client’s Tax Return Can Tell You
- A Better Reverse Mortgage for High-Value Homes
- 37 Frequently Asked Questions About Reverse Mortgages
The content of this blog is for financial advisors and professionals only and is not intended for consumer use. Names, cases, and scenarios are fictionalized for illustrative purposes. The opinions expressed here are those of the author alone and do not reflect the views of any affiliated entities or individuals. Don Graves, NMLS #142667.
