Your Questions About Reverse Mortgage Lenders

Donald asks…

Reverse mortgage and estate law?

My mother is looking into a reverse mortgage what concerns me is what happens to her estate when she passes will the lender have a lein on the house how can this effect willed property?

admin answers:

The reverse mortgages I have seen are non recourse loans- meaning that in a foreclosure situation the lender could take the house but not come back against your Mother’s estate for any shortage.

What seems to often happen is the parent borrows as much as they can on a reverse mortgage and is able to live in the house the rest of their life without making payments. They do have to pay insurance and property taxes.

When the die or move out to a retirement home then the mortgage has to be paid off. If no one pays the mortgage off then the loan company is allowed to foreclose on it and sell it for whatever they can get.

During the time your mother lives there without making payments the interest is building into the principal each month and the loan is getting bigger and bigger. So when she no longer lives in the house the loan will probably be so large that you will not be able to sell it for enough to pay off the loan. But any other inheritance would not be affected.

Lisa asks…

trustee wont sell home with reverse mortgage?

Dad passed away 3/7/2009 My brother the trustee will not let us sell the home . He is also cashing Dads equity funds that the lender are still sending. I do not want to take him to court. Till I have some inherantance . Then I will for all the money he took when Dad was alive. Brother had POA with access to all dads bank accounts

admin answers:

Call the lender’s servicing department and tell them your father died, give them your brother’s name and address. If he’s cashing the annuity checks, he’s committing fraud. If you know about it and don’t rat him out, you could be considered an accomplice. And you’re getting screwed because the interest on the reverse mortgage is mounting every day, and fees are being incurred. Your brother is messing with your inheritance.

He has to do something because once the person with the reverse dies, the loan is due.

In fact, all mortgages work that way. When the guy with the mortgage is no longer around, the estate must pay off the mortgage somehow. This applies even when there are other owners who were not borrowers. They have the same options in any case, using whatever money is available, selling the house and paying the mortgage with the proceeds (additional proceeds would go to the heirs) or if someone wants to keep the house and has adequate income and credit they may be able to refinance it into their own mortgage.

Once the bank knows the mortgagor is deceased, they will give you some time to make whatever arrangments, but if nothing is done after a reasonable amount of time, they will start foreclosure. In other words, you may think you can trick us if you don’t tell anyone what’s happened, but we will find out eventually and you may regret not being honest. “You” in the generic sense, not specifically you the person asking this question. My concern for you is that you know what’s happened and could find yourself in some hot water too.

If the lender is BofA, call 866-863-5224. They’re in Seattle, open from 7am to 8pm Pacific time. You’d probably call that number for Countrywide too.

Carol asks…

Does anyone understand Reverse Mortgage?

I have only one daughter. I have an offer for $56,500 from a lender. I owe just the same amount. I refinanced twice, so no equity left in the house. The letter says I won’t have to pay this back as long as I live in the house. What will happen when I die?

admin answers:

The money is repaid from your estate when you pass. Depending on the contract it could just be the house is forfeited an no other monies owed. I am surprised you received a reverse mortgage having refinanced, but it is done now.

Make sure the bank will let you sell for the amount owed. I doubt they will, it should be stated on the reverse mortgage.

Steven asks…

Paying off reverse mortgage?

My father took out a reverse mortgage several years before he died, my mother lives in the home. With the real estate market as it is now, the value of the home is probably not much more than the balance on the reverse mortgage.
My brother and I have cared for my mother for 6 years so far, and when she leaves the home, we do not want to have to come up with any additional funds if the place sells short.
Can we just sign it over to the lender so we don’t have to deal with the whole thing?
We are not concerned with financial gain from any inheritance, but neither of us are in a position to pay off this mortgage, or make up the difference.

admin answers:

The only way I would recommend prepaying a reverse mortgage is if your mom is very low income and is going to move into a subsidized senior apartment complex. In that case, it might be a good idea. Otherwise, I wouldn’t recommend it. For one thing, where will your mother live if you sign it over? Are you or your brother prepared to take her in or pay for an apartment?

For most reverse mortgages, the heaviest expense was upfront in the financing fees. You won’t get that back if you pay it off soon. If she passes away and the house value barely covers the reverse mortgage, then any assets she has in her estate can be used to pay it off, and if those aren’t enough, then that is the bank’s problem and the risk they took in giving your father the loan. You won’t be responsible for the shortfall.

It’s nice that you are helping your mother. But, her debts are not your responsibility to cover when she dies. It will come from her estate.

There are some specialists in elder law and reverse attorneys you may want to talk with for the specifics. Try this website for a referral www.benefitscheckup.org. Or, you may also want to contact the AARP and ask them for a legal aid referral.

Good luck.

William asks…

Is it really the fault of the lenders?

“Redlining”, in which mortgage lenders would refuse to grant home loans to low-income areas used to be common practice in the industry, because it avoided risk. With the Community Reinvestment Act (CRA), which was passed in 1977and revised under the Clinton and Bush administrations, reversed this trend. Lending institutions were coerced by the government to begin a practice known as “Reverse Redlining”, in which people who cannot afford houses are given loans for those houses anyway. Before we start blaming the lenders, why don’t we repeal the CRA?

admin answers:

That’s true. The government shouldn’t have encouraged such risky loans. The country would be better off today. Mainly, I guess it doesn’t matter at this point who is to blame. The problem needs to be addressed and quickly.

Even with all of the money that the government is going to throw on top of this fire, we have yet to see if it will be a fix or just a band-aid. I think the problem is far too complex to guess at the outcome. We will just have to wait and see what happens next.

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