San Francisco / Bay Area Reverse Mortgage Guide

How a Bay Area Home's Value and Equity Shape the Loan

The amount a reverse mortgage may make available depends partly on the home's value. On the Peninsula or in Marin County, it is fair to wonder whether a higher value means a larger loan. Under the federal program, the answer depends on a cap.

The federally insured reverse mortgage is called a Home Equity Conversion Mortgage, or HECM. HUD's HECM page says the amount available varies by borrower. It depends on factors that include the age of the youngest borrower or eligible non-borrowing spouse and the "lesser of appraised value or the HECM FHA mortgage limit or the sales price." The appraised value is the home's value as set by an appraisal. The federal limit is often called the maximum claim amount. HUD publishes the current figure.

In plain terms, the calculation starts from whichever number is lowest. If a home's appraised value is above the federal limit, the limit is the number used, not the full value. This holds the same way in San Mateo County, Santa Clara County or anywhere else in California.

Reverse mortgages also exist outside the HECM program. These are often called proprietary reverse mortgages, and they are offered under a lender's own terms. California's reverse mortgage law applies to these loans as well. That includes the counseling rules described below.

Who Is Eligible: Federal Requirements for a HECM

A family in Alameda County or Contra Costa County may first want to know whether a parent can apply at all. The federal rules start with age, the home and counseling.

Age. The statute defines a homeowner as someone who is, or whose spouse is, at least 62, or an older age if HUD sets one. That definition appears in 12 U.S.C. § 1715z-20(b)(1). HUD's regulation says the youngest borrower must be 62 or older at loan closing (24 C.F.R. § 206.33).

Principal residence. The home must be the principal residence of each borrower at closing. If there is an eligible non-borrowing spouse, it must be that spouse's principal residence too (24 C.F.R. § 206.39).

The property. The loan must be secured by a dwelling designed mainly for one to four families, with the borrower living in one of the units (12 U.S.C. § 1715z-20(d)(3)). The statute's definition of a mortgage also covers some cooperative housing units and some long-term leaseholds. HUD and the lender decide which specific properties qualify. The HECM property requirements explain the condition and repair rules.

Counseling and disclosure. Under 12 U.S.C. § 1715z-20(d)(2), the borrower must receive several things. These include independent counseling and full disclosure of all costs charged, with required and optional charges clearly separated. The borrower must also meet any other requirements HUD sets.

A first mortgage. The statute defines a HECM as a first mortgage. That is why any existing mortgage on the home is part of the conversation.

Meeting these points does not mean a loan will be made. A lender reviews each application, subject to its own approval.

Required Counseling — and California's Additional Protections

A counseling session is often the first time a homeowner hears the whole picture from someone with nothing to sell. Federal and California law both build that step in.

Federal counseling. Counseling must come from an independent third party. That counselor cannot be associated with, or paid by, anyone who originates, services or funds the loan, or who sells annuities, investments, long-term care insurance or other financial or insurance products (12 U.S.C. § 1715z-20(d)(2)(B)). Under subsection (f), the counselor must discuss several topics, including:

• options other than a HECM
• other home equity conversion options, such as property tax deferral
• the loan's financial implications
• a disclosure that the loan may have tax consequences, affect eligibility for federal and state programs, and affect the estate and heirs

Finding a counselor. HUD's page says to find a counselor near you by searching the HECM Counselor Roster or calling (800) 569-4287. The roster serves homeowners in San Francisco, Alameda, Contra Costa, Marin, San Mateo and Santa Clara counties. The CFPB lists questions to ask, including how the loan would affect a spouse or others living with you.

California's added protections. California adds several steps of its own:

• A required notice. Before counseling, the lender must give a notice in large type. It says a reverse mortgage "IS A COMPLEX FINANCIAL TRANSACTION." It also says senior advocacy groups advise against using the proceeds to buy an annuity (Civil Code section 1923.5).
• A worksheet. The applicant also receives a worksheet guide to bring to the counseling session.
• A list of agencies. Before accepting a final application, the lender must provide a list of at least 10 HUD-approved counseling agencies. Those agencies may not be paid by the lender (Civil Code section 1923.2(j)).
• A seven-day wait. A lender may not accept a final application or charge the applicant any fees until seven days after the counseling date. The lender must also first receive a signed counseling certification (Civil Code section 1923.2(k)).
• No annuity requirement. A lender may not require an applicant to buy an annuity as a condition of the loan (Civil Code section 1923.2(i)).

How You Can Receive the Money: Payment Options

A borrower in Oakland or San Jose may need a single repair paid for, or may need steady help each month. The federal statute allows for both.

Under 12 U.S.C. § 1715z-20(d)(9), the borrower chooses how payments are made. The amount is based on equity, minus applicable fees and charges. The options are:

• A line of credit. Money is drawn as needed.
• Monthly payments for a set term. The borrower chooses the length.
• Monthly payments for a set term, plus a line of credit.
• Monthly payments over the borrower's tenure. Tenure means for as long as the borrower lives in the home and meets the loan's terms.
• Tenure payments plus a line of credit.
• Any other basis HUD considers appropriate.

Each of these is what a lender may pay under the loan's terms, subject to the lender's approval and the borrower's obligations.

The borrower may generally switch from one method to another during the loan. For a fixed-rate loan, however, HUD may limit that by regulation (subsection (d)(10)). California adds a protection here: if the loan pays periodic advances, those advances may not be cut in amount or number because the interest rate changes (Civil Code section 1923.2(d)).

The amount available follows the factors HUD names, described earlier. A calculator estimate is only an illustration. Counseling is the next educational step for a real figure.

Costs, Fees, and the Growing Loan Balance

The cost of a reverse mortgage is not one number. It is a set of charges that arrive at different times. California law allows costs and fees charged when the loan is signed, on a periodic basis, or when the loan matures (Civil Code section 1923.2(c)). The reverse mortgage costs in California are described in more detail separately. The main categories each work a little differently.

Mortgage insurance premiums. The Federal Housing Administration charges these, both upfront and yearly. The upfront charge comes at the start of the loan, while the yearly charge continues for as long as the loan is outstanding. HUD publishes the current rates.

The origination fee. This is the lender's charge for making the loan. Federal rules limit it, so the rules set a ceiling rather than a fixed price, and the lender discloses the actual amount. The statute provides that it may be fully financed with the mortgage, which means it can be added to the balance instead of paid in cash.

Third-party closing costs. These include the appraisal, title and escrow. They pay outside companies for the work needed to close the loan.

Servicing fees. These cover administering the loan over time, so they are part of the ongoing cost rather than the starting cost.

Interest. It may be fixed or adjustable (Civil Code section 1923.2(b)). Because no monthly payment is made, interest is not paid down along the way; it builds on the balance.

Because the rules state ceilings, not the amounts a borrower pays, the actual figures come from the lender's disclosures. Any cost that is financed is added to the balance.

That is why the balance grows. The FTC says interest is added every month, so debt rises and equity falls. The guide to loan balance growth shows how. No monthly mortgage payment is due while the borrower meets the loan's obligations.

Federal law requires several disclosures that let a borrower follow these costs (12 U.S.C. § 1715z-20(e)):

• a projected total cost of the loan, given before closing
• a statement about the borrower's rights, given at least 10 days before closing
• a yearly statement, by January 31, showing the amounts paid, the interest added and the balance

The loan can also be paid off early, in whole or in part, without a prepayment penalty (Civil Code section 1923.2(a)).

Property Tax Relief and Other Alternatives for Bay Area Seniors

Property taxes are one of the loan's continuing duties, and they are also where some relief may be found. Federal and California rules are the same in every county. Local bills and relief, however, come from each county's own offices. Homeowners in Alameda, Contra Costa, Santa Clara, San Mateo and Marin counties turn to their own county assessor and tax collector. The details below come from the City and County of San Francisco's own pages, and local figures such as the tax rate apply to the fiscal year shown.

San Francisco tax bills. The Treasurer & Tax Collector says secured property tax bills are mailed in October. The first installment is due December 10 and the second April 10. The rate for fiscal year 2026-27 is 1.18162182%.

If taxes go unpaid. A bill that is still unpaid on June 30 becomes tax-defaulted. Under the delinquent tax page, it then accrues 1.5% per month, plus a one-time redemption fee. An owner not yet in "power to sell" status may request a five-year installment plan. That plan requires a yearly payment of 20% or more, and the owner must also keep current taxes paid.

Homeowners' exemption. The Assessor-Recorder says the homeowners' exemption takes up to $7,000 off assessed value, a saving of about $80 a year. Revenue and Taxation Code section 218 sets that amount. The deadline for the full exemption is generally February 15, with limited exceptions under Revenue and Taxation Code section 255.

Parcel tax. The Tax Collector's parcel tax page notes that some school measures include a Senior Citizen Exemption for those who meet certain criteria.

State postponement. The same page describes the State Controller's Property Tax Postponement Program. It lets seniors, blind homeowners and homeowners with a disability defer current-year taxes if they meet certain criteria. It gives (800) 952-5661 for more information. Revenue and Taxation Code section 20583 includes two conditions: the owners need at least 40 percent equity, measured each time a claim is filed, and a secured tax bill.

Moving. San Francisco's Proposition 19 page and its base-value transfer page describe a benefit for owners 55 or older. They can carry their taxable value to a replacement home anywhere in California, up to three times. The new home must be bought or built within two years of selling the old one.

Borrowing alternatives. Other ways to borrow work differently:

• A home equity loan pays a lump sum that is repaid monthly.
• A home equity line of credit allows draws as needed, also with payments.
• A cash-out refinance replaces the existing mortgage with a larger one.

All three require monthly payments. The reverse mortgage vs home equity loan comparison sets them side by side.

Selling. Selling or downsizing turns equity into cash but means leaving the home. The guide on reverse mortgage vs selling compares that choice.

What Happens to the Home — and the Heirs

For adult children, the question is often what the loan means for the house later. Under the federal statute, a borrower's duty to repay is deferred until the homeowner's death, the sale of the home, or other events HUD specifies, with "homeowner" including the spouse (12 U.S.C. § 1715z-20(j)).

Events that make the loan due. HUD's regulation sets out when that deferral ends. The balance becomes due when a borrower dies and the home is not the principal residence of at least one surviving borrower, subject to the spouse deferral described below (24 C.F.R. § 206.27(c)). With HUD's approval, the loan can also come due in other situations. These include:

• the home stops being any borrower's principal residence
• a borrower is away for more than 12 consecutive months because of illness, with no other borrower living there
• property charges are not paid
• another obligation is not performed

The home can be lost. A borrower can lose the home if those duties are not met. California's worksheet states it plainly: uncured defaults lead to foreclosure.

Short absences. Under Civil Code section 1923.2(g), an absence of up to 60 consecutive days does not make the loan due. Longer absences of less than a year are also allowed if the home is secured to the lender's satisfaction.

What the estate owes. The FTC says that generally the borrower, a spouse, a co-borrower or the estate repays the loan. With a "non-recourse" clause, the borrower or the estate cannot owe more than the home's value when the loan comes due and the home is sold. The HECM statute provides this limit in subsection (d)(7).

A surviving spouse. For an eligible non-borrowing spouse, the loan documents must defer the due date during a "Deferral Period." That period lasts until the last such spouse dies or HUD's conditions stop being met (24 C.F.R. § 206.27(c)(3)).

The servicer and HUD's rules govern the steps and timing for heirs.