A case study for reverse mortgages and group home care: commentary

Laurie MacNaughton of Atlantic Coast Mortgage near Washington, D.C. describes how evolving elder care models are moving faster than certain reverse mortgage guidelines

For nearly 50 years, Charles had been concertmaster to some of the greatest conductors of the age: Sir Thomas Beecham, Leonard Slatkin, Mstislav Rostropovich — to name a few. When I met him, his hands — though still lovely and graceful — were mottled by age and quaking with the effects of advanced Parkinson’s disease.

In early 2023 Charles and his wife, Lizbet, made the tough decision to sell their Washington, D.C. home and move to a condominium just over the river in Virginia. Between downsizing, packing, staging, and showing the home, the stress began to tell on Charles, so he and Lizbet decided it best for Charles to respite at a care facility until they settled on the new property.

Just miles from the new condo was a group home located in a single-family residence, licensed to care for no more than 8 residents. Far more affordable than larger, more traditional care facilities, the group home offered around-the-clock supervision, but no onsite medical care.

Reverse mortgage specialist Laurie MacNaughton of Atlantic Coast Mortgage.
Laurie MacNaughton

Residents either continued under the care of their own physicians or contracted care with medical professionals associated with the home.

Before underwriting would consider Charles a borrower — rather than an ineligible non-borrowing spouse — we were required to provide a doctor’s letter stating the discharge date.

And therein lay the issue. Charles was respiting at the home on an at-will basis and could leave at any time. There was no firm discharge date, and a letter from the facility’s owner/administrator stating as much did not answer the underwriting condition. Charles’ doctor would not write a discharge letter, stating she had no control over his leaving.

As the settlement date approached, we seemingly were no closer to a solution than we had been at the time of application, mainly because guidelines simply did not account for the group home care model.

In the end, we satisfied the condition by submitting Charles’ medical records; a letter from him stating his intent to move home; and the contract from the group home — which clearly stated residents were there on an at-will basis.

We made our 21-day HECM for Purchase closing. But we were also left with the realization that guidelines have not kept up with evolving trends in elder care.

Group homes go by many different names, and regulations vary by state. However, according to the Centers for Disease Control and Prevention (CDC), in 2020 there were some 13,000 small-scale, “residential care communities,” the generic term applied to the group home care model.

Across the U.S., these homes provide care to some 81,600 residents. This number, of course, represents only a tiny fraction of seniors living in long-term care homes, a number that in 2020 stood at 1,290,000.

Nonetheless, the group home care model is unlikely to go away, as the need for residential living communities is projected to accelerate by some 60% over the next 10 years and — according to the US Census Bureau — is already nearly double what it was in 2012.

Hopefully, underwriting guidelines will evolve along with evolving care solutions.

This column does not necessarily reflect the opinion of Reverse Mortgage Daily and its owners.

To contact the author of this story: Laurie MacNaughton at [email protected]

To contact the editor responsible for this story: Chris Clow at [email protected]

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