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UPDATED: AUGUST 1999

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INCOME UNEARNED

REVERSE MORTGAGES

Description: A homeowner can convert home equity into cash without moving out of the home through a variety of home equity conversion plans. The home is either sold or mortgaged, but remains occupied by the homeowner until a future date or the death of the homeowner.

Under a reverse mortgage (RM), the homeowner borrows up to a fixed percentage of the appraised value of the home, for a set period of time, usually five to ten years. The funds borrowed are generally paid to the homeowner monthly. Repayment of the loan and any accrued interest is not due until the end of the loan term, the death of the borrower, or the sale of the property. A reverse annuity mortgage (RAM) is an RM in which the funds borrowed are paid to the homeowner through the purchase of an annuity.

Policy: For LIF, S/CC and ADC-related A/Rs, both RMs and RAMs are disregarded as income and resources.

For SSI-related A/Rs, an RM is generally disregarded as income and countable as a resource if retained beyond the month received. However, if the RM is a RAM, the annuity payments are unearned income in the month received and a resource thereafter.

References: SSL Sect.

366.1 366.2

Documentation: Sufficient to establish an audit trail: