Why Can't You Get a Reverse Mortgage?

A reader of the Ask Real Estate column in the New York Times wants to know why reverse mortgages are not available to people who live in co-ops.

The answer is that reverse mortgages – similar to a home-equity loan or line of credit for homeowners 62 or older – are available only to people who live in what’s called real property, including single-family homes, condominiums and some smaller multi-family properties. In a co-op, the residents are shareholders in a corporation, not owners of real property.

It’s just one of the many ways – some good, some bad – that co-ops differ from more conventional home ownership.

Among the many dubious lending practices that led to the housing market collapse in 2008, some portfolio lenders bent the rules and gave out reverse mortgages to co-op shareholders. The crash put an end to the practice. “As of now, lenders are not offering reverse mortgages on co-ops,” says Jordan Roth, a mortgage specialist at GuardHill Financial.

Way back in 2000, the federal government passed a law allowing co-op shareholders to take out reverse mortgages, but never issued the guidelines needed to implement the change. Until the federal Department of Housing and Urban Development acts, reverse mortgages will remain forbidden fruit for co-ops.