HUD announced that a new mortgagee letter will be coming in the next 60 days. The mortgagee letter will likely be about advertising, as HUD is apparently not pleased with advertisements that promote borrowers using the proceeds from a reverse mortgage for a vacation or expensive personal items.

However, reverse mortgage proceeds are for the borrower to spend at their discretion. While HUD has been very suspicious of borrowers using reverse mortgage proceeds for annuities or other insurance products, there is nothing to keep them from doing so.  Further, a recent article actually promoted seniors putting money from a reverse mortgage into life insurance policies so as to be able to pass the money to their heirs tax-free–an interesting way to use a reverse mortgage for estate planning.

Ads in other countries with similar reverse mortgage programs also use advertising focusing on a vacation or luxury item. The philosophy is that the money is the senior’s to use at their discretion.  These are some ways a senior might choose to do so.  As a result, it will be very interesting to see what (if any) guidelines on advertising HUD releases with the next round of mortgagee letters.  While a reverse mortgage is a loan like any other and does need to be taken seriously as a financial investment, one hopes seniors are still free to take out a reverse mortgage– regardless of whether they take it out for something serious (medical expenses, home repairs) or something more luxurious (yacht, vacation, car).