Just saw a question in GD that promoted me to ask this. My grandparent-in-laws have a reverse mortgage on their home. They want to move closer to our family nownthat they're aging and can't really take care of themselves like they used to. They met with a realtor and were basically told that for what the home prices are selling for nearby, they would be about $10k short on what they would owe. What I don't understand is that they don't pay the bank anything now- strictly real estate taxes. Why wouldn't they just be able to walk away from the home? Not sell it. Just walk away? They arent paying anything on it due to the reverse mortgage. Thank you.

A reverse mortgage is just that:  instead of slowly buying the house from the bank, in a reverse one slowly sells it to the reverse mortgage holder with the seller taking a bit of equity out of the home each month in the form of a cash payment they use to meet daily living expenses.

While it varies from state to state, generally the "owner" only pays the taxes and insurance; the interest payment is added to the loan balance so it's fairly easy to end up with negative equity (loan balance exceeds the value of the home).

In your GPILs' case, it's about $10k away from turning negative.

Where would they live after they moved?  Do they have the money for another home?

They would be moving in with my mother in law.

OK, solves that part.
But what about the $10K in the red.  Don't they have to own the house before being able to do a reverse mortgage?  I'm sure the mortgage company would love for them to walk away, they get the house for the price of property tax.

hummm,

I a 99% sure this is illegal.

Move them in with the MIL, And then rent the place out.

How so?

I'm not terribly familiar with reverse mortgages but I think the entire end-game of it is to have the resident carried away on a stretcher and the financial institution gets the house. I seem to recall millions walking away from their homes in 2008, wasn't illegal. Lot of words for it, but I don't think illegal is one of them unless I misread the op.

They need to read their mortgage contract.  Most likely, they can turn it over to mortgage company without paying anything.

Seems like a related question is how do you get out of a reverse mortgage?  There should be a way of leaving the deal with most of the equity still owed, net of fees.

If the grandparents still have the deed, they could "walk away" by signing a quit claim deed.  The bank probably has a predetermined way of ending the contract in a way grandpa can get some money though.  Market value compared to purchase price could come into play though.