Tornadoes and Reverse Mortgages

By Rae Hartley Beck
Updated August 26, 2022
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Doretha Clemon
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Reviewed by Doretha Clemon
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Doretha Clemons, Ph.D., MBA, PMP, has been a corporate IT executive and professor for 34 years. She is an adjunct professor at Connecticut State Colleges & Universities, Maryville University, and Indiana Wesleyan University. She is a Real Estate Investor and principal at Bruised Reed Housing Real Estate Trust, and a State of Connecticut Home Improvement License holder.
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Ryan Eichler holds a B.S.B.A with a concentration in Finance from Boston University. He has held positions in, and has deep experience with, expense auditing, personal finance, real estate, as well as fact checking & editing.
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A reverse mortgage is a way for many seniors to get much-needed additional income by tapping into their home’s equity when they’re no longer able to supplement their income through work. So what happens when the most vulnerable lose their housing after a tornado if they have a reverse mortgage?

Key Takeaways

  • If you have adequate insurance coverage, your home will be repaired, and your reverse mortgage will not be due.
  • If you have inadequate or no insurance coverage, your reverse mortgage will become due, and you will have to go through an appeal process to avoid foreclosure if you can’t pay it back. 
  • If you can’t afford repairs to your home or temporary housing, FEMA and your local aging services organization may be able to help.

How a Reverse Mortgage Works

A reverse mortgage is a type of loan that you can apply for if you’re over 62 and own your home outright or have significant equity in it. A reverse mortgage allows you to tap your home’s equity without having to pay back the loan until you pass or move away. Reverse mortgages require you to keep the property in good repair with adequate insurance coverage.

Insurance Coverage and Reverse Mortgages

All reverse mortgages are required to maintain insurance coverage, or their loan balance becomes due. Because a reverse mortgage uses your home as collateral, you are also required to keep your home in good repair, or your reverse mortgage balance becomes due. You may find yourself in trouble if your homeowners insurance coverage is inadequate to repair or rebuild your home after a tornado.

1,376

Tornadoes in the United States in 2021, more than usual, with 193 in the month of December alone—double the previous record as a result of climate change.

Reverse Mortgages With Adequate Insurance Coverage

If you have a reverse mortgage with adequate insurance coverage and your home is hit by a tornado, you should be able to have your home repaired or rebuilt without your loan balance becoming due. Contact your lender to see what specific documentation they will need. As long as your homeowners insurance includes coverage for additional living expenses (which is also referred to as loss-of-use coverage), you will be able to have temporary housing expenses like a hotel or rental covered.

Reverse Mortgages With Inadequate Insurance Coverage

If your home does not have adequate insurance coverage to repair or rebuild your home after a tornado, your reverse mortgage may become due. If you find yourself in this situation, you will receive a notice of default from your lender with appeal rights. Make sure that you follow the steps to start the appeal process, which can help you remain in your home for longer.

Reach out to your local aging services organization. If you’re unsure how to find them, call 1-800-677-1116, visit Eldercare.ACL.gov, or call 211 for contact information and referrals to services that can help you. Even if you have inadequate insurance coverage, there are many programs in place to help you repair your home and remain in it, so don’t give up hope.

Will My Reverse Mortgage Become Due if a Tornado Hits My House?

Your reverse mortgage becomes due if you live outside of your home for more than 12 consecutive months or if you fail to retain home insurance coverage. If a tornado hits your home and you don’t have adequate insurance coverage, or you have to live somewhere else for over a year, your reverse mortgage will become due.

How Will I Pay for Housing if a Tornado Hits My Home?

If a tornado severely damages your home and you are unable to live in it while it is repaired or rebuilt, then you have several options for paying for housing. Your homeowners insurance may have loss-of-use coverage, which will help pay for housing up to a certain monthly amount for a set length of time. Review your coverage with your insurance agent for your specific coverage limits.

Can I Get Help From FEMA After a Tornado Hits My Home?

Yes, you may be able to get help from the Federal Emergency Management Agency (FEMA) if your area was hit particularly hard by tornadoes. FEMA has its own criteria for declaring a disaster and does not always declare a disaster for isolated tornado incidents. Large-scale devastation like the tornadoes that struck parts of Kentucky in December 2021 was declared a disaster. If a disaster has been declared by FEMA, then federal grants kick in, which can help you access temporary housing and fund repairs to your home to make it safe, sanitary, and functional.

The Bottom Line

If a tornado hits your home and you have a reverse mortgage, what happens next depends on your insurance coverage. Be proactive and make sure that you have robust coverage in place now so you’re in a good position if the worst happens. If you don’t have adequate coverage in place, you may still be able to get your home repaired and remain in it, but the process will require contacting local organizations and FEMA for help (if a disaster has been declared).

Article Sources
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  1. U.S. Department of Housing and Urban Development “How the HECM Program Works.”

  2. Consumer Financial Protection Bureau. “What are my responsibilities as a reverse mortgage loan borrower?”

  3. National Oceanic and Atmospheric Administration. "U.S. Saw its 4th-Warmest Year on Record, Fueled by a Record-Warm December."

  4. Consumer Financial Protection Bureau. "What Should I Do if I Have a Reverse Mortgage Loan and I Received a Notice of Default or Foreclosure?"

  5. Federal Emergency Management Agency. “FEMA Continues Response to Tornado-Damaged Areas, Kentucky Receives Major Declaration Approval.”

  6. Federal Emergency Management Agency. “How a Disaster Gets Declared.”