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MEDICAL SERVICES POLICY MANUAL, SECTION E

E 518 Reverse Mortgage or Home Equity Loan

(See MS E-514). If the home is held in any form of shared ownership, only the applicant’s fractional interest will be considered. (See MS E-512) The LTC application must be approved for Medicaid if all eligibility requirements other than the home equity limit have been met. The individual will not be eligible for a vendor payment until the equity in the home is below the current maximum but may receive other Medicaid services with the exception of PACE and Waiver services. Request for Undue Hardship Waiver An individual who is denied eligibility due to excess home equity may request an Undue Hardship Waiver. An example of a situation in which an undue hardship may exist is if the individual makes an allegation that the home equity should not be counted because of a legal impediment to selling or transferring the home. (Re. MS H-710) Reverse Mortgage or Home Equity Loan MS Manual 10/26/15 An individual may obtain a home equity loan or a reverse mortgage to reduce the total equity interest that he/she has in the home in order to qualify for Medicaid payment for facility care, PACE or Home and Community Based Services. A reverse mortgage is a type of loan that establishes a maximum Line of Credit that the homeowner is allowed to borrow using the home as collateral. Any funds that the individual receives from the reverse mortgage or home equity loan are disregarded in the month received as proceeds from a loan. Any funds received from a reverse mortgageor home equity loan are counted as a resource if retained after the month of receipt.  NOTE: If the proceeds from a reverse mortgage or home equity loan are transferred during the month of receipt and the individual does not receive fair market value in return, the transfer will be considered an uncompensated transfer and a penalty period will be determined. If on the first of the month an individual has retained a payment from a home equity loan for an amount greater than the resource limit, he/she would be ineligible to receive Medicaid until the resources are reduced to meet the resource eligibility limit. If the individual gives this money away, this would be considered an uncompensated transfer and a penalty period will be determined.