Reverse mortgages are the only home loan products in which people with bad credit don't pay any more for their loans than people with good credit. And as long as you don't have an active (not discharged) bankruptcy going, your credit problems won't keep you from getting a mortgage approval. But people with bad credit need to be really careful about one thing when they get a reverse mortgage, also called a Home Equity Conversion Mortgage (HECM). Or they could lose their homes.

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FHA, which administers and insures the most popular reverse mortgage program in the country, has stepped up its enforcement of its policies and increased foreclosures of HECMs. How can a loan that requires no payments from the borrowers end up in foreclosure? It can if the borrowers don't pay attention to the requirement that they preserve the home's value by paying its property tax on time, keeping hazard insurance in force, and maintaining the home and grounds.

In the past, FHA was very reluctant to throw out aging homeowners who forgot to pay their property taxes or who let their hazard insurance policies lapse. It didn't want to be tossing old people into the street when it could just wait until they vacated the home, sell it, and repay the loan. But the agency can no longer afford to do that; it lost $798 million last year -- the first loss ever.

Why should it matter if you miss your insurance or tax payment? Because if you don't keep your insurance in force, and your house burns down, FHA takes a huge loss -- the collateral has little value. If you don't pay your taxes, the county can lien your home, and it gets paid first in a sale -- the lender may not get everything owed. And if you don't maintain the home, and keep the grounds safe, the resale value could drop, and the lender could end up with a loss.

People with bad credit often get that way because they're a little, um, casual about paying bills and taking care of business. If you do that with a house and you have a reverse mortgage, however, you could end up homeless before you know it.