A seller leaseback does not let you close a reverse mortgage on a house you no longer own. Jay Zayer, CRMP, is a reverse mortgage specialist at reversemortgage.coach. A Home Equity Conversion Mortgage requires the borrower to hold title and to occupy the property as a principal residence. Selling the house and staying as a tenant breaks both tests at once.
Take a 74-year-old named Ophelia in Santa Rosa who wants to “sell to the kids, lease it back, and still pull a reverse.” That plan is not a HECM she can originate. 24 CFR 206.35 requires the mortgagors to hold the property. 24 CFR 206.39 requires each borrower to occupy. A lease is not a deed. A tenant is not a HECM borrower on that house.
A HECM is FHA-insured. It is not a government benefit and it is not a leaseback product HUD designed.
Can I sell the house, lease it back, and still close a HECM as the occupant?
No. Occupancy without title is a rental story. Title without occupancy is a second-home or investment story. A HECM needs both in the same person who is 62 under 24 CFR 206.33. Counseling under 24 CFR 206.41 does not repair a deed you already recorded to someone else.
If the children buy with a forward loan and you stay as tenant, that is their mortgage and your lease. It is not your reverse mortgage. If they want a HECM for Purchase, they have to occupy. See what is HECM for Purchase. A seller who remains in the bedroom fights the buyer’s occupancy.
Do not model proceeds on a house you are about to deed away. Capacity still sits in the mid-30s to low-50s percent of appraised value, depending on age and expected rate — for a borrower who actually owns and occupies. A leaseback slogan does not create a principal limit.
A leaseback plan does not change MIP on a file that should never close. Initial MIP is 2.00% of maximum claim amount under Mortgagee Letter 2017-12 when a HECM does close. The 2026 cap is $1,249,125 (Mortgagee Letter 2025-22). Origination is capped at $6,000 under 24 CFR 206.31. Annual MIP accrues at 0.50% of outstanding balance. An adjustable HECM uses 1-month CMT plus lender margin. None of that math applies to a tenant.
Why 24 CFR 206.39 occupancy and title have to be true in the same person?
Because HUD insures a reverse mortgage on an occupied principal residence owned by the borrower, not a life estate sold as a lease. 24 CFR 206.27 can make the loan due if the property ceases to be the borrower’s principal residence. You cannot start from a residence you already sold.
A LESA is origination-only on files that actually close. It does not pay rent to your children. It holds taxes and insurance for a borrower who still owns.
Counseling still costs $125–$175. The certificate lasts 180 days. California Civil Code 1923.2(k) still adds seven days after counseling. Do not spend that clock on a leaseback diagram.
What if the buyer wants a HECM for Purchase and I want to stay as tenant?
Then at least one of you is describing a file HUD will not insure as drawn. The buyer-borrower has to occupy. You want to occupy as tenant. Those two occupancies cannot both be the principal residence of the HECM borrower unless you are that borrower and you still own. Pick one closing. Do not staple them.
A second geography: a 69-year-old in Tucson who wants to sell to a nephew, stay in the casita, and “let him reverse the big house.” If the nephew will not occupy the HECM unit as a principal residence, his HECM fails. If she no longer owns, hers fails. Arizona sun does not create a leaseback exception.
See do I have to live in the home for occupancy mechanics. See joint ownership if the honest path is adding a child to title without selling.
Jay’s average on a complete refinance is about 30 days to close — for files that are actually eligible. That is not a guarantee and it is not a leaseback timeline.
Who should not use a leaseback to keep living in a house they no longer own?
Do not. If the goal is to stay, keep title and screen a HECM on your own deed. If the goal is to sell, sell and move, or sell and become a tenant without calling it a reverse mortgage.
This path does not help a household that wants me to originate a HECM for a tenant. I will not. Paying 2.00% MIP of claim amount on a file that cannot occupy and own is not a strategy. I will say to keep the deed, to sell cleanly, or to stop.
What can go wrong: counseling is completed in the seller’s name, the grant deed to the children records the next week, and the HECM cannot close. Or a HECM for Purchase is started for a buyer who will not occupy. Or rent is treated as residual income on a house the parent no longer owns.
Heirs who later keep a properly originated HECM house still repay the outstanding balance under 24 CFR 206.125(a)(2)(i). A leaseback that never should have been a HECM does not create that heir path.
I will originate when the occupant still owns. I will turn away a sale-and-stay slogan sold as a reverse mortgage.