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Reverse Mortgages: What Happens After Death?

December 19th, 2011
   

mortgage_house

Seems that one of the most popular questions we get is what happens with my reverse mortgage and my home after death. After all, the reverse mortgage is intended to be the last loan that borrowers will ever need, so this is a question many Mature Americans and their heirs have on their minds. If they do get a reverse mortgage and it does enable them to live in their homes without paying a mortgage payment for the rest of their lives, what happens when they pass?

Borrowers may or may not know that the benefit amount is based on the age of the youngest borrower. Those who have done their research and know this fact want to know what will happen if the younger borrower dies or has to permanently leave the home first. And all borrowers with heirs are always rightly concerned about what happens to their homes and the mortgage upon their passing.

Firstly, to clarify one point, there are never any monthly payments of principal or interest due on a reverse mortgage. The loan accrues interest and other charges that are not due and payable until the last borrower permanently leaves the home (12 months or more). However, the borrowers are still responsible for payment of taxes and insurance and for the upkeep on their homes.

Borrowers who get into this loan thinking that they will no longer have any expenses on that home are incorrect and if they cannot afford the taxes, insurance, (Homeowner’s Association Dues if they live in a condominium) and other expenses to maintain that property are in for a rude awakening and should be looking at other options. So to be sure that you can live in the property for the rest of your life with your reverse mortgage, your income or the income that you will receive from that reverse mortgage must be at least high enough to pay these expenses while allowing the borrower to live in comfort.

Now that we have determined that a reverse mortgage is right for you, what does happen to the mortgage and the property after death? This is one of the areas in where it is similar to a forward or traditional mortgage in some ways, but slightly different in others. Reverse mortgage borrowers own their homes, not the bank. Many believe that the home reverts to the bank upon the death of the last borrower, but that is not the case.

Just as with a forward mortgage, reverse mortgage borrowers can sell their properties and move if they change their minds later and decide that this won’t be the last residence of their life and they can leave their homes to their heirs. Just as with a forward mortgage, the reverse mortgage must be paid off but all remaining equity stays with the borrowers or the borrowers’ heirs. The bank does not make the decision as to when you stay or leave you home and there is no prepayment penalty.

Borrowers who do stay in their homes for many years do accrue interest and charges on a reverse mortgage and the amount of remaining equity will depend on how much money the borrowers have taken from their mortgage, the interest that accrues and the values of properties. For example, borrowers who obtain a reverse mortgage under the payment option or the line of credit option and then do not draw large sums of money immediately or only draw a little now and then, will not accrue interest as fast as those who take a lump sum draw on the entire amount. And then current real estate values and what values have done since the mortgage was first obtained will dictate whether or not there has been any appreciation in property values.

I have seen some articles wrongly blaming a reverse mortgage for depleting equity in specific properties and upon further research, the borrowers obtained more cash on their loan than the property was worth when they tried to later sell that property due to the massive drops in real estate values in general. After the death of a spouse or borrower, if the real estate market is extremely depressed, if that borrower received more cash on their reverse mortgage loan than the property is currently worth then there will be no equity in the home…but that would be true of any mortgage product including traditional or forward mortgages.

The reverse mortgage does not dictate the real estate market and with the current real estate conditions, thousands and thousands of borrowers find that they now owe more on their current mortgages, both forward and reverse, than their properties are worth. This is where the insurance reverse mortgage borrowers receive really comes in handy but I will talk about that later.

Borrowers determine the disposition of the property upon their death with their wills just as any other borrowers do, whether they have a forward mortgage or no mortgage. The property is passed to the borrowers’ heirs and then the borrowers’ heirs must do the same thing they would have to do with a forward mortgage – determine if they want to keep the home or sell the home. If they want to keep the home, then they must pay off the balance with a new loan (refinance) or with other money available to them. If they choose to sell the home, then the heirs need to contact the servicer of the reverse mortgage as soon as possible and inform them of their decision and maintain communication with that servicer.

Some feel that the heirs have an automatic 12 months to decide what to do with the property and that is not the case. Upon the death of the last remaining borrower, the heirs have periods typically of three months at a time up to 12 months with the lender’s approval to sell the property. During this time, the lender or the lender’s servicer will want to see the efforts of the family to sell and this is where the communication is important. The lender has no desire to have to foreclose and sell a property on their own, but if the family is not making any attempts to sell the property and repay the loan, the lender must eventually step in to facilitate the repayment of the loan.

Upon the sale of the property, all remaining equity belongs to the heirs, just as with a forward mortgage. A reverse mortgage is a non-recourse loan. Which means that, if with the combination of the accrued interest and current market conditions the property will not sell for enough to repay all amounts owed on the loan, then the borrowers’ heirs are not liable for any additional amounts owed.

As previously mentioned, borrowers pay for mortgage insurance to the Federal Housing Administration (FHA), a division of The Department of Housing and Urban Development (HUD) which guarantees that the borrower and the borrowers’ heirs will never owe more than the property is worth on a bona fide sale to a third party. The program does require a bona fide sale to a non-related third party, heirs cannot “sell” the home to other family members for less than is owed on the reverse mortgage expecting the FHA insurance to cover any shortfall to the lender on the amount owed (there are no restrictions on sales to family members or otherwise, just in the case of a balance of the reverse mortgage being higher than the value of the property and heirs wanting the lender to forgive the over value portion of the loan and still keep the property within the family).

This should dispel a few myths about what happens upon the death of reverse mortgage borrowers…

The bank does not own the borrowers’ home, the borrowers and their heirs (upon their passing) do. Upon the death of the last remaining reverse mortgage borrower, the family has the right to keep the property or sell it and if the home is not worth enough to pay off the entire mortgage, the heirs are not liable for any shortfall on a bona fide sale to a third party due to the non-recourse nature of the loan.

Heirs need to maintain communication as they do not have a set 12 months to dispose of the property after the death of the last remaining borrower…even though the lenders are only too willing to work with families who have a viable marketing plan for the property.

Reverse mortgages become due and payable upon the death of the last remaining borrower or when the last borrower permanently leaves the home. But, borrowers must also pay their taxes and insurance and maintain the property to stay within the reverse mortgage contract – it is the monthly mortgage payments of principal and/or interest that reverse mortgage borrowers will no longer have to pay as long as they live in their homes.

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41 Comment(s)

Zoe Hicks12/11/09 7:41pm What if the lender buys the property subject to the reverse mortgage (mortgagor has died) in a foreclosure sale and resells for less than the mortgage balance. Any tax consequences to the estate of the reverse mortgagor?
Susan Dess1/15/10 1:51am What happens if the bank is forced to sell the house after the borrower dies because the family has not communicated with the bank or attempted to sell the property? After the mortgage is paid, do the hiers receive any remaining equity?
Michael Branson 1/15/10 6:56pm As for the first question. You really need to talk to an accountant for tax questions. Unfortunately we cannot give accounting or legal advice.As to the second question. Every reverse mortgage borrower is required to put an “alternate contact” on their application that the servicer uses in the event that they can no longer contact the borrowers, as would be the case if the borrower(s) passed. Most often, the alternate contact is the borrower’s family member or an heir and therefore they have been contacted long before any action has been taken by the bank to foreclose on a reverse mortgage. The heirs would then be in contact with the lender and can begin a plan to determine how they want to dispose of the mortgage, by refinancing the lien, paying it off with other funds, or by selling the property. If for some reason, the alternate contact has changed their contact information and the servicer cannot locate any heirs, then the lender would be forced to foreclose on the property.The bank starts the bidding on any foreclosure sale at the amount owed on their loan plus all costs in the foreclosure proceeding. In other words, the first bid is the bank’s and it is the amount they are owed. The only way there would be any excess equity that would go to the borrower’s estate would be if someone else bid more than the bank did and then anything bid above and beyond the amounts owed would go to the borrower’s estate.For this amount to be a significant sum (the first bid above the bank is going to be a very small increase and the bank will not bid against the new bidder, they will take what is owed to them and be out of it), you would need to have multiple bidders raising the sales price which, although can happen, is not a common occurrence at foreclosure auctions. So the short answer is that yes, if the property sells at auction for more than is owed to the bank for the loan plus costs, the remaining amount would go to the heirs but it seldom happens that properties sell much above the banks opening bid. Luckily, with the alternate contact, most heirs have spoken with the lender’s servicer long before the property ever goes into foreclosure and the two have worked out a plan to retire the debt.

Thanks for the great question! – Michael Branson CEO All Reverse Mortgage

Kim Williamson2/15/10 6:53am My grandmother died in September of 08. We were not close and I knew nothing of her affairs. I have just been served a summons that the house is being forclosed on, with paperwork showing she had signed for a reverse mortgage in 05. Are all reverse mortgages no-recourse in Florida? I do not want her house, Do I need an attorney or can I just write to the court and the mortgage company’s attorney that I want nothing to do with this property? Will I end up owing money? The house is vacant. My grandmother has other grandchildren but I do not know them. (There names were listed on the summons.) Thank you for your help.
Michael Branson 2/16/10 11:20pm Kim,If your grandmother took out her loan in 2005, there is a possibility that she has a loan other than the HUD HECM mortgage as there were other loans available during that timeframe known as proprietary reverse mortgage product. I would imagine that any loan she received in 2005, proprietary or otherwise, was a non-recourse loan.I cannot give you legal advice, but I can tell you that you should definitely contact the lender or the servicer who is handling the loan. Let them know of your interest or lack thereof. As an heir, they are required to inform you of the proceeding. You are under no obligation to step in and take over the property nor would you end up owing any money. You did not sign the Note promising to pay any obligation so there is no reason not to contact them. You will not owe anything personally.
Mary Glover2/28/10 7:35pm What happen if your parent passes and there is no will and you want to keep the property , but you have bad credit.
Mary Glover2/28/10 7:40pm What happen if your parent passes and there is no will and you want to keep the property , but you have bad credit.
elizabeth autrey3/1/10 3:27pm my parents are considering a reverse mortgage on their home. there is no balance owed on the home. however, once the appraisal is done will a title research be done as well. i was told that my name (heir) is on the property but I am not sure. if my name is on the property, will I have to sign the papers for the reverse mortage? will both parents need to be on the reverse mortgageg loan in order for them to remain in the home until the end? let’s say they get an appraised value of 60,000.00 how many months will be this be divided into to make payment back to borrowers?
amy carpenter3/18/10 4:50pm when a borrower passes away and has left everything to a grandchild. The grandchild plans on getting a loan to buy the house to keep it in the family. Is the house hers from the moment the borrower passes away? The property automatically hers so she can do whatever she wants? Does’nt she have to put the property in her name before she is the real property owner?
Michael Branson3/25/10 6:29pm Hi Amy, There are two issues here. One is what happens to the heirs of a borrower who had a reverse mortgage and the other is with regard to property ownership laws. Let’s deal with the first one first. The heirs of a borrower who had a reverse mortgage can contact the servicer, let them know what your plans are and then make arrangements to carry out those plans. They will work with you toward the disposition of the property if you are selling it or give you time to pay off the existing loan or to obtain new financing if you are obtaining a new loan. The key, as we have always advised, is good communication with the lender or their servicer. The second part of your question is much more difficult for me to answer and one that I really can’t answer for a number of reasons. Different states have different laws regarding property ownership. I am also not equipped nor am I licensed to give legal opinions or advice regarding these various laws. There could also be issues with the way the property passes title (i.e. was it done in a will or by trust), there could be probate issues or any number of issues with which we are not familiar and on which we cannot give a definitive answer. For an issue such as title rights and when and how the property can change title after the passing of the borrower(s), I would recommend that you contact a good real estate attorney practicing in the state where the property is located.
Damita Wanzer4/19/10 6:51pm What if, in a reverse mortgage, the Bank asks for a substantially higher amount on the house that what was borrowed or due. The person died soon after getting the loan. After the bank is paid the original amount plus interest, etc. Does the difference belong to the heirs?
Michael Branson4/20/10 8:27pm Damita,I’m not sure I understand the question entirely but let me answer with what I think is being asked and if this doesn’t answer your question, please feel free to give us a call. I think you’re telling me that the house is worth substantially more than the amount owed at the time of the borrower’s passing. If this is the case, then the heirs should step in and sell the property themselves and not have the bank foreclose and sell it.The borrower owns their home, not the bank. The bank merely has a lien against the property to ensure repayment just like any loan. When the borrower passes, then the borrower’s interest in the home passes in accordance with the borrower’s wishes. If there is equity in the home, then the heirs can sell the home and they would keep all the remaining equity…not the bank.The only time the bank would sell the property would be if the borrowers died without heirs and the bank had to dispose of the property to pay off the loan or if the heirs chose not to dispose of the property and again, the bank had to foreclose and sell the property to pay off the loan. if there is remaining equity then the heirs would normally step in and sell the home themselves, pay off the loan and keep the difference. The house and the proceeds belong to the borrower or the borrower’s heirs after the repayment of the loan plus interest and costs.
Mary J5/18/10 6:37am My mother-in-law took out a reverse mortgage about 9 years ago. If I’m understanding everything that I’ve read, the heirs are not responsible for any loans on the home, correct? The house doesn’t have much value to it, and it hasn’t been kept up at all. We would bulldoze it, if it were ours. She doesn’t have life insurance, or any money set aside as she has had a gambling addiction for years. Is there anyway to make it legal so that we’re not responsible for any of her bills, including funeral expenses? I know it sounds cold, but she has a working son living with her in is late 50’s that has the same addiction and hasn’t contributed anything to her household, if anything he has enable their gambling addiction. She said she hand wrote a will several years ago (she is 84). I just want to make sure that we’re not stuck with any of her bills or costs of her funeral as she never did anything for us. Again, I know that sounds cold, but you have to know the situation.
caryl5/28/10 8:00pm everything i’ve read about “what happens after death” takes the position that the home is worth more than the amount owed on the reverse mortgage and the heirs pocket the profits. but in today’s housing market, that’s hardly the case. my mother got a reverse mortgage in 2003, taking the money in chunks here and there, and she recently passed away. the reverse mortgage now totals over $42k (more than half of it in interest and servicing fees), but the condo is worth only $21k. my sister and i would like to keep the condo, but what lender would give us a refi loan for double the amount of the property???!!! and we can’t see buying the condo for so much more than it’s worth, so we’re forced to sell. the mortgage company won’t suffer since HUD will make up the difference, so once again the little guy gets the short end. any advice?
Leo 5/31/10 3:23am A little over a year ago, my father and step mother were talked into a reverse mortgage, dad was 68 and mom 61. However, they took mom’s name off the house in order to do this reverse mortgage. There was a discussion that once mom turned 62 she could be added back onto the title of the home, and be added to the reverse mortgage. Needless to say, dad was in poor health at the time of this transaction, under a lot of stress to take care of his affairs before he passed away ( he had been given 6 months to survive). Dad passed away with in weeks, and literally within days of any payments made by the reverse mortgage company to things like property taxes and stuff. When mom contacted the reverse mortgage company they told her to hang on till she was 62 and then they would put it in her name, in the mean time she had to make a valid attempt to sell the home, and pay them off. She of course did not do this, and when she turned 62 they said they were going to have to foreclose on the home. It is my understanding that they want mom to go to the county office now, and add her name on to the title of the home as his heir. If she does that, is she helping them to foreclose quicker, or is she helping to get the reverse mortgage in her name. Her name was always on the home, and to be told to take it off for the reverse mortgage to go through in the first place, seems a bit shady to me. Were they swindled, knowing my father was going to pass away? Both were under mental duress during this time, and if I must admit it, my mother has been clinically diagnosed as what we call crazy….due to depression, could she be considered incapable of signing her home away to a reverse mortgage company? I just need to know what her options are, before she loses her home.
Michael Branson6/1/10 8:05pm Caryl-I have to tell you straight off that I do not agree with your analysis. If the condo is worth only $21k after the slide in the property values and your mother already received the bulk of those funds (the $21k current worth) in her reverse mortgage and was able to live in her home without having to make a payment since 2003, I hardly feel as though your mother or you got “the short end” on that deal. Regardless of how much over the $21k value the reverse mortgage is, you can never be made to pay more than the property is worth and based on that, your mother received almost 100% of the value of her home in cash.The reverse mortgage was designed to give your mother the funds she needed to remain in her home and not have to make a payment for the rest of her life which it did. Your mom was able to access the equity without having to make a mortgage payment for approximately 7 years. The massive drop in the real estate market hit everyone and whether your mother had taken out a reverse mortgage or a home equity line of credit (HELOC), her value still would have dropped and with a HELOC, she still would have been making monthly payments all those years to the bank and her condo would not be worth any more than it is now. Chances are those monthly payments would have gone to interest only (assuming she needed the cash to begin with and that’s why she took the reverse mortgage), keeping her balance at or above the current value of the condo and giving her less money to live on after the monthly payments than she was able to get with the reverse mortgage. In this sense, your mother absolutely did better with the reverse mortgage as she was able to live more comfortably for the last 7 years and you can’t owe more than the property is worth so you’re no worse off than you would be if your mother had borrowed in another manner. So this is why I simply don’t agree with the premise that “the little guy got the short end”.If you really want the condo, you can always let the lender foreclose on the current mortgage rather than trying to sell it yourself. Then you could purchase the property when it is placed on the market at the market price by the lender. Once the property is owned by the lender/HUD, you would run the risk of being out-bid by another purchaser, but depending on the real estate market and if there are other units available for sale in the area, then there might not even be danger of a bidding war on your mother’s condo and this may not be an issue. At any rate, you certainly can purchase the condo at the current market and if you are not in a position to purchase the property, you would have been in the same spot with a HELOC that would have been due and payable when your mom passed as they are not assumable loans either.
Michael Branson6/1/10 8:08pm Leo-I’m not an attorney so I don’t know what recourse your mom has or whose idea it was to take her off the title in the first place. This is exactly why we advise borrowers never to take one spouse off title to get a reverse mortgage unless they are completely aware of the ramifications and have a viable back up plan in the advent that the older spouse passes prior to the younger spouse. The reason for this is exactly what your mom is faced with right now, as a younger spouse, she will not be able to qualify for as much on a reverse mortgage as he did.I do not know who first originated your parents loan or with which lender you are dealing now, but all of the lenders with whom I have worked have been honorable people and I do not believe a lender would request that your mother do anything with the ulterior motive of foreclosing on the property faster. Nor do I think it would speed things up as a default already exists on the current mortgage.I would be more than happy to run some back up numbers on the program for her if she desires to see if she can obtain enough funds on the newer, no cost programs to pay off the existing lien and refinance the property in her name (that could be their motivation, you cannot do a refinance until you own the property). I think that would be your best due diligence in the short run. You could even call a company for your mother with her birth date, property value and amount owing on the existing reverse and they can tell you if the proceeds she can obtain will be sufficient to pay off the existing balance. If so, then getting the title changed and then starting a new mortgage in her name would be a good idea and you could continue with the current company if you felt better about that. The most important thing here is taking care of mom.
lynn6/2/10 2:02am What if you have a reverse mortgage and need to move into a senior facility can’t sell so can you notify bank you are moving cannot pay let them foreclose
lynn6/2/10 2:37am Not sure I worded my question properly…If a person cannot sell a home on a reverse mortgage and needs to move into a senior home or apartment can they give the deed to lender and let them foreclose without penalties? Heirs donot want property and value now equals what is owed
Caryl6/2/10 4:38pm Thank you so much for your cogent and honest answer. Now that I view the situation from your perspective, I can see just how much my mother did benefit from taking out the reverse mortgage, and in light of your convincing explanation please forgive me for focusing unfairly on the “short end.”I am going to give careful consideration to the idea of the lender foreclosing on the property and then I would buy it back. That is not something I thought was possible. The real estate market in southern Florida is in a pretty depressed state, so I don’t think there would be much of a bidding war.Once again, thank you for taking the time to explain the situation to me — I do appreciate it. Caryl
Kristen7/11/10 8:11am My dad took out a reverse mortgage in 2004 and died in 2008. The estate, of which I am the executrix, has tried to stay in contact with the reverse mortgage company but they stopped responding about 10 months ago. They have put locks on the doors, ignored our real estate agents offers for the house and have even done damage to the building by sending a crew in to winterize the house, resulting in broken pipes, theft, etc…They have not sent me one notification about any of these actions. No foreclosure notices…nothing. Our question is—who is liable for damage to the house? We live in Massachusetts. Clearly their negligence has resulted in a protracted situation, even though we offered deed in lieu and was rebuffed in our last conversation 10 months ago, at which time they said the property was in the foreclosure department. We are at our wits end. The lawyers cannot get in touch with them either. We want to sue them for lost value to the house. Can you advise?
Michael Branson7/19/10 5:26pm Kristen,I am sorry, but I really cannot give you legal advice regarding this situation. This is now a legal issue and you should seek the counsel of a competent real estate attorney.There are a few questions you may want to ask yourself though. A reverse mortgage is a non-recourse debt. If you have already offered a Deed in Lieu of Foreclosure, then I have to surmise that you are not interested in paying off the debt and keeping the home or have tried to sell the home with little to no luck, and that there may be no remaining equity at this time. One thing you may want to discuss with your attorney is letting the lender complete their foreclosure at this time. There is no reason to worry about the effects of a foreclosure, credit is no longer a concern for your father and his foreclosure has no effect on you whatsoever. If the lender is not working with you, there is nothing to be gained to try to continue to work with them, you may want to ask your attorney why you should even try to continue rather than letting the lender complete the foreclosure.If you are still the owner, that is, the property was willed to you and the foreclosure has not gone through, then the lender should not have entered the home in the first place unless Massachusetts laws give them the right to enter into the property and secure it if they believe it to be abandoned. This is another question for your competent legal counsel. If the lender acted in accordance with the law to secure the property, then you would want to determine the proper laws to retrieve any personal belongings still in the property which you wished to collect. If the lender acted outside the law (i.e. it is determined that the lender did not give proper notice and therefore had no right to enter the property), then you may have grounds to have any locks on the doors, etc removed until such time as they do obtain the property through legal means.I am not a licensed attorney and especially not familiar with the laws in your state but there are a few statements you made which concern me. If the lender had not completed the foreclosure, typically they would not have secured the property and would not yet be involved with the real estate agents unless they were being asked to take a short payoff of the outstanding mortgage balance on a sale. If this is the case, then again, you need to ask your attorney and yourself if there is even any benefit for you to be involved in this transaction any further. A lender is usually only too happy to accept a Deed in Lieu of Foreclosure once it is certain that the property is sure to go to foreclosure. Doing so saves them time and considerable amounts of money in processing/legal fees if they can get the property immediately without having to go through the entire foreclosure process. I do not know for the life of me why the lender would deny you the opportunity to give them a Deed in Lieu of Foreclosure after more than 10 months and keep it in the foreclosure department which only takes longer and costs more money for the lender. I would suggest you contact someone higher up the ladder if you still want to make that offer as this would only cut time and costs for them.

With regard to the damage to the home, if the home is already going to be sold for less than the outstanding balance of the reverse mortgage, then the lender will never recoup the total amount owed to it at foreclosure sale let alone the damages. It cannot request payment of those damages from you (whether they actually committed the damage or not). I don’t know what lost value to the house you could prove you suffered if you were going to give the home back to the lender in a Deed in Lieu of Foreclosure or lose it to foreclosure at this time anyway. It sounds like if the lender did do anything to lessen the value further, then they may have only hurt themselves. Here again, only an attorney could advise if this situation would warrant any judgment in your favor for damages on a home under these circumstances.

I wish I could be of more assistance but as I stated, I am not a practicing real estate attorney in Massachusetts and I cannot give legal advice. I can tell you that with a reverse mortgage you have a non-recourse loan meaning the lender cannot go back after anything but the security (your father’s house) to recoup their money. I can tell you that in 2004 real estate was extremely high and that in 2008 it had fallen in almost every area of the country. If your father’s home is anything like many of the properties we deal with, he may have gotten his entire current value out with the reverse mortgage and if that is the case, he (or you) actually did better on the transaction since he already got the majority of the property’s current value out of the home. And lastly, I can tell you that if the loan balance is higher than the current value of the home, it is comforting to know that you don’t HAVE to do anything. As I stated, there is no other recourse for the lender than the home and if your father already got the current value out with the reverse mortgage, if it were me, I would let the lender take it after I got all my father’s personal items out of the home. All things to discuss with your family and your attorney.

Dave8/5/10 8:51am My mom took out a reverse mortgage about 3 years ago. I was there when the salesman was discussing a reverse mortage and at signing. She opted for a line of credit. Mom passed this past June and there is still a sum of money left in her line of credit. The finance company says, per FHA guidelines, that only she can withdraw money from the line of credit and therefore the money left is not acessible to mom’s heirs or estate. Is this true? Doesn’t make sense. I know the salesman never mentioned this because I would have told mom to take a lump sum since she could die after signing the papers and the finance company would get a free house! At the time mom was thinking of filing bankruptcy and had retained an attorney. She sent the papers to him even though he wasn’t familar with reverse mortgages. He found no red flags, like what happens to money left in a line of credit upon death. I’ve surfed a lot looking for the truth on this matter and no where can I find anything on the remaining balance of a line of credit upon death. Not even on HUD’s site!!! Thank-You
Wayne Boeckelman8/9/10 2:41am My personal experience is that reverse mortgages are a nightmare. My mother had a reverse mortgage, had used all the money alloted to her, was on a deferred property tax plan, and still really should not have been in the house because she could not afford to live there. We finally had to have her put in a nursing home because she could not get in and out of bed without assistance. We knew that she was never coming home and we attempted to sell the house. We hired a landscaper to clean up the outside, had the carpeting shampooed, and spent a lot of time attempting to make the house as presentable as possible. The real estate market in Chicago in the fall of 2008 was, like virtually everywhere else, down. The only offer was an amount that was a short sale, which of course the reverse mortgage company turned down because the loan is guaranteed by the government. At that time we communicated to the reverse mortgage company that the house was all theirs. They came out, changed the locks and winterized the plumbing. My mother passed away in January of 2009 and I thought we were all done with the house. She had no other assets and I had to borrow $6,000 to pay for the funeral, as she did not even have any insurance. This past June the reverse mortgage company served papers on me and my oldest child (age 23) to sue me for the amount of the reverse mortgage, over $300,000. I have had to hire a lawyer and he says although we should get out of the lawsuit, he’s worried that this will be listed as a foreclosure on both mine and my daughter’s credit rating. I do not have the words to describe how much I hate reverse mortgages.
Michael Branson8/18/10 8:03pm Wayne-I am truly sorry for your troubles, but I’m not really sure how to respond to this. It sounds like your mom may have had a private or “proprietary” reverse mortgage that is not the HUD Home Equity Conversion Mortgage (HECM or “Heck-um”). I can’t say for sure, but the HECM would not allow for that.You did say that it was “government guaranteed” and the HUD HECM is a government, FHA-insured loan. But the HECM is a “non-recourse mortgage”. If the loan was other than a HUD HECM, I really can’t comment on a proprietary or private mortgage that might contain unfamiliar terms. But a HUD non-recourse mortgage means that the lender can only go back to the property as their security. The loan documents themselves do not allow the lender to go back after the borrower or the borrower’s heirs for anything above and beyond what they can get from the property for repayment on the debt…the property is their only security. You may want to check with your mothers documents to see just what type of loan she had. If you can’t find copies of her documents, you could probably find out for sure just with the recorded documents available at the county recorder.I am not an attorney and cannot begin to give legal advice but you might want to ask your attorney about the possible violations if the lender filed any derogatory credit information against your or your daughter’s credit ratings for a foreclosure on your mother’s home – a loan for which neither of you ever signed a promise to pay. Any filed foreclosure would contain the borrowers name and the property information, not yours, and therefore should never show up on your credit (after all, neither of you ever signed an agreement with that lender promising to repay a debt). Again, not legal advice, just something to discuss with your attorney.If your mother used all the money for which she was allotted, then the reverse mortgage may have allowed her to borrower ultimately more than the home was worth after the falling values. With regard to her still not being able to afford the home, this is exactly why we encourage families to become involved from the very beginning. The reverse mortgage does require that the borrower still be able to pay the taxes and insurance and maintain the home and if that is still beyond the borrower’s means, then it is really not the right option for that borrower and it’s better to discover that fact before the borrower gets the mortgage.
Michael Branson8/18/10 8:05pm Dave -they were correct in that only your mother could access the line of credit. She is the borrower on the loan so only she is able to take out advances on the line. However, any money she did not use would still be equity in the home and that would still belong to her heirs, not the bank. So when you say that the finance company gets a free house, that is where you miss the mark a bit.Any money that your mom did not take out on the line, she also did not accrue interest on and was not considered borrowed funds. Therefore, her heirs can now step in and sell the property or pay off the loan and keep the house and all you have to pay off is the outstanding balance of the amount she actually did use plus the interest that accrued on that portion of the loan. The finance company does not get the house, if you are your mother’s heir, you can sell the home and the additional equity that you will realize due to the fact that she did not use those funds will still be yours. It’s just like a regular Home Equity Line of Credit in that regard. You can’t take any more money out of the line after the borrower passes, but you also don’t have to pay back any of the amount that was not used when you sell the home.
Adrienne with Responce 10/15/10 5:00pm My Mother and Father obtained a reverse mortgage a couple years ago. Both names are on the property and loan papers that come each month. Mom died this year. My Father has someone else living there with him who is not on the loan. They have plans to be married. Does any of this effect the property? It is my understanding that Dad can get married and live at the property but if he dies before my step mother, she would have to vacate the property at that time. Is that a fact? What about other people living at the property? Can my brother move back into the home without any problem to my Father? I have read everything I could find on reverse mortgages but cannot find anything about “other people” living on the property Please explain..Adrienne – If both mom and dad were on the original mortgage (as they were in this case) then the loan will continue to be valid so long as either one of them continues to live in the property, in this case, that would be your father. The fact that your father remarries or has children living at home will not affect effect his reverse mortgage. Other people can live with your father.You are correct though, that when your father passes, the loan will become due and payable but whether or not his new wife has to vacate the property is entirely up to ownership at the time and ability to repay the loan. Your father always retains title to the property under a reverse mortgage and therefore, retains the right to pass title to his chosen heir(s). The person(s) who inherit the property would then be faced with the decision as to how they want to pay the loan off, whether that means refinancing the loan to keep the property, paying it off with other funds at their disposal or selling the property. If he/she/they had the means to pay the loan off with funds at their disposal or via refinance, then they could continue to live in the property.
Susan with Responce10/15/10 5:03pm I have had a bad loss. My Mom has passed away she has a reverse mortage and it is owed more then the home is worth. I has a cousin living there who will not move out. She gave mom maybe 20.00 a week. She cannot afford the electric bill and needs to move to a welfare home.What am I responsible for? There is two others in our family.What do we do? I do not have the money to buy the home off and the mortgage is double the amount.There is not other estate either. Please help meSusan – If your mom had the FHA-insured HECM reverse mortgage, your mother paid for Mortgage Insurance which protects her estate and you both against just this type of issue. The loan is a non-recourse loan, which means the lender can only go back to the home to satisfy the debt, they cannot seek anything from you or other heirs. If the mortgage is double the current value of the home, then your mom was lucky enough to have already gotten more money out of the home than its value. You can remove all of the personal belongings, contact the lender and inform them that you do not wish to market the home due to the current loan balance. They will take the property back and file a claim with HUD for any losses after the property is sold but in the mean time, you and your family are off the hook and it will not have any effect on you.
Sandy with Responce10/15/10 5:34pm Thank you so much for the great information. All my doubts and questions were satisfied. I am the heir to my mother’s home. She has been placed in a long time care facility due too Alzheimer’s. She has at the most several months before this disease wins. I am residing in the home and have made major repairs and upgrades to her home. I have been told that now that I am 62 that when she passes away I can have the reverse mort. put in my name if I so desire. Would this be considered a refinance? I am her P.O.A. and sole beneficiary of her estate. I am also prepared to sell the home if this is what I must do to repay the outstanding balance owed . Please respond. Thanking you in advance.Sandy,As the heir to the property, you are refinancing the existing financing on the home, but it is not what they call a “HECM to HECM” refinance since the original loan was not in your name. May sound a little strange, but you have two choices in verbiage with regard to either a purchase or a refinance transaction and since you acquired the home by inheritance and already have ownership, you are not buying it. Therefore it is a refinance transaction to put the financing into your name. HUD has special considerations when a reverse mortgage borrower is refinancing their own existing mortgage though and since you were not the borrower on the original loan, you would not be subject to , nor the beneficiary of some of those considerations.You can qualify for a reverse mortgage however, depending on the value and the amount of the loan your mother used, you may not be able to qualify for a large enough balance to pay off her entire loan. Since you are younger (and older borrowers qualify for more money under the program) your benefit amount may not be adequate to pay off her full balance if the value has not increased and she has used all her funds and accrued interest. You can however choose to pay the shortfall, if any, and continue to reside in the home payment free if that is what you choose to do and it is a viable option for you.
Steve with Responce10/15/10 5:36pm My mother recently died and she had a reverse mortgage. My sister and I have no idea how to handle this and our real estate agent seems confused as well. Will we need to start making payments on the house now that she has died? – SteveSteve,No payments must be made but the loan entire loan balance is now due and payable. You need to contact the lender and find out what the current balance is on her loan. If she had the FHA-insured HECM reverse mortgage, then she also had a non-recourse loan which means that if the loan balance is higher than the current worth of the property, you will not be responsible for any shortfall on the sale. The first step though is to contact the lender since you have already spoken with a real estate agent and know the approximate value.
Laura with Responce10/15/10 5:38pm My grandmother passed away and we lived in the house with her. We cannot afford to pay off the loan so we are going to lose the house. Can we remain in the house during the foreclosure process or do we need to leave by the day that the bank lists as the date to begin the foreclosure? Also, does this foreclosure reflect on our credit if we are in the house? – LauraLet’s start with the easy one. The foreclosure can only be reported on the credit of the individual who signed the promise to repay the debt and then did not do so in the manner in which they promised to pay. Since you never signed a promise to repay (Note and Deed or Mortgage) the lender cannot report delinquent credit against you, whether you lived in a home with your grandmother or not. If that were the case, parents who did not make their car payments would jeopardize their children’s credit who rode in the car. You must sign a legal agreement and then fail to meet the terms of the agreement as promised before a lender can report you to a credit bureau.As for the second part, I cannot give you legal advice and foreclosure laws are different in different parts of the country. Most procedures take several months after initiated and borrowers can remain in the house during the process before the lender obtains title to the home. But I cannot assure you of this in your area, nor do I know if it would make any difference that you are not the legal owners of the property (unless the property title was actually given to you when your grandmother passed). You may want to check with a local attorney to verify your rights. Lenders typically cannot begin to list and market a home until they have retained the title to the property through the foreclosure process. At that time, you would no longer be able to stay in the home as the lender would be the legal owner.
John with Responce10/19/10 8:49pm Michael, Reading through the Q & As from the last few months may I compliment you on your answers and efforts to help. Hopefully you may be able to help me as well. My wife and I put in a bid for a HUD property last month and were successful (a condo in North Carolina). We are delighted and are waiting to close/pay cash. We have just been told by the estate agent that the attorney says that HUD should have foreclosed on the property and didn’t so there is a problem with the title. The background to the condo history is the elderly unmarried owner took out a reverse mortgage, stripped the condo and started renovations, then died. I was told he died intestate, but I do not know if there are any heirs/descendants. HUD (through agents HMBI) have said they don’t see a title problem and we can extend our contract to buy for a short time – but our Attorney says they need go through foreclosure properly which would mean the return of our earnest money and the property going back on the market next year and we would have to start again. Any thoughts? My thought is to get another attorney? Many Thanks, JohnHi John-I wish I could help you but this is one that really has nothing to do with the reverse mortgage and everything to do with the legal aspects of the property rights in North Carolina and that is not something on which I am an expert. For the lender or HUD (whoever held the mortgage at the time) to obtain the ownership and then sell the property, they would have to go through some sort of foreclosure action, the property does not automatically “revert” to them. Otherwise, they would be selling a property on which they had a valid lien, but no ownership rights at the time. Your attorney/title company can tell you if the foreclosure process had ever been initiated or completed based on the documents filed with the county recorder’s office and how long it takes to complete a foreclosure in North Carolina based on statutory time frames.As to whether or not your sales contract could be enforced as soon as their ownership rights had been perfected is another question. I do agree with you, if you were happy with the price you had originally negotiated (especially if you think they might try to raise it in a subsequent sale) and if you incurred any additional costs besides just the earnest money deposit which would be returned (any reports or services you paid for) I think I would get a second opinion to see if you could have the contract put on hold until the lender/HUD did own the property and then complete the transaction. But that is also assuming that you don’t mind waiting for the foreclosure process to be completed.
JANAKI1/4/11 4:48am My fatherinlaw took a reverse mortgage 2.5 years ago, to pay for medical help he needed. He lived with my sisterinlaw, whose salary was not enough to pay for this help, nor very much of their day-to-day expenses. My FIL got property tax breaks due to being a senior, and a veteran.My SIL was POA. My FIL just died last week, and we found out that he had been taking a very large monthly payment, so equity has been very reduced. My SIL is very very scared, as she has almost no savings, (having been under the mistaken impression that being his POA allowed her to continue drawing reverse mortgage payments. FIL had no life insurance, so funeral expenses need to come out of estate. SIL had declared bankruptcy 2 years ago. When my motherinlaw died 3 years ago, SIL convinced my FIL to have us pay back a gift of $10k which he had given us a few years before – which we did. She then convinced him to cut my husband out of the will because she was living with him, so he owed her more than my husband. My husband did not object to this, in interest of family peace (not that I liked it). Papers were drawn up, but they never got around to signing them, so original will is in place, with both children splitting estate. When we saw how my sister was spending money, my husband recently reiterated to SIL that he wanted none of the estate, which she readily agreed to (at that time she still believed she would have access to the Reverse Mortgage payments). Then last week my father in law died. Today, she started looking at the reverse mortgage payments, and is freaking out. My question is-as he had previously renounced any involvement in the estate, and had not involvement in the reverse mortgage or funeral arrangements, all of which were handled by my SIL, is he still potentially liable for anything to do with the Reverse Mortgage because the will currently lists him as an heir to the estate? The financial decisions my FIL and SIL were not ones we would have made, and we told them that, but they were not interested. We have tried to be financially responsible and frugal, but we have modest means, and cannot take on a lot of debt for my SIL. Any ideas on our financial liability? Thank you
Michael Branson 1/5/11 7:41pm @ Janaki, The short answer to a long question is that you are not responsible for any of the reverse mortgage liability. The reverse mortgage is a non-recourse debt and the lender can only look to the property for repayment of the loan. If the property is worth more than the balance of the reverse mortgage, then the heirs can sell the home, pay off the reverse mortgage and keep any left-over funds. However, if the balance on the reverse mortgage is greater than the home is worth, you do not have to accept the responsibility to dispose of the property. Your husband should just remain in contact with the lender and work with them to help transfer title so that they can begin to market the property.If the lender is forced to foreclose, then the foreclosure action is against the original mortgagor (your deceased father-in-law) since he is the one who signed the loan documents and whose Deed of Trust (lien) the lender is foreclosing upon. Therefore, if your sister-in-law is not cooperative in the efforts to market the property, that will not affect your credit. As an heir to the estate, you could lose any rights/interest you have in the home, but that is all and your individual credit will not be affected.
Need To Know3/4/11 10:23pm This quetion was posted twice on 2/28/2010 by Mary Glover: “What happen if your parent passes and there is no will and you want to keep the property , but you have bad credit.” Nobody ever answered her question, and unfortunately, we are in the same position. What can be done?
Michael Branson3/9/11 12:04am You actually have a couple of different issues. The first is when a person or persons die “intestate” – meaning they have prepared no will and have not made their wishes known. We are not a law firm and therefore cannot give legal advice so I would suggest that you contact a probate attorney to determine the fastest and least cumbersome ways to obtain the property.The second issue is the reverse mortgage. The reverse mortgage is just like any other mortgage. If your parent(s) had a standard forward mortgage, it too would become due and payable upon your parent(s)’ death. The options you have are to refinance the loan into your names with other financing, pay the loan off with other funds available to you or to sell the home and retire the debt that way. I have seen lenders advertising that FHA has programs that do allow for credit scores as low as 500 (I do not know how bad you mean when you say “…but you have bad credit”). We do not do these loans so I do not know their requirements, but there seems to be some additional flexibility out there.I do not know how long it will take for the property to go through probate in your area, so you may have time to start checking into some of the available FHA programs for lower credit scores as well as make the determination as to whether or not you will ultimately need to market the property before you start bumping up against deadline dates. I wish you the best.
Michael Branson3/9/11 12:05am You actually have a couple of different issues. The first is when a person or persons die “intestate” – meaning they have prepared no will and have not made their wishes known. We are not a law firm and therefore cannot give legal advice so I would suggest that you contact a probate attorney to determine the fastest and least cumbersome ways to obtain the property.The second issue is the reverse mortgage. The reverse mortgage is just like any other mortgage. If your parent(s) had a standard forward mortgage, it too would become due and payable upon your parent(s)’ death. The options you have are to refinance the loan into your names with other financing, pay the loan off with other funds available to you or to sell the home and retire the debt that way. I have seen lenders advertising that FHA has programs that do allow for credit scores as low as 500 (I do not know how bad you mean when you say “…but you have bad credit”). We do not do these loans so I do not know their requirements, but there seems to be some additional flexibility out there.I do not know how long it will take for the property to go through probate in your area, so you may have time to start checking into some of the available FHA programs for lower credit scores as well as make the determination as to whether or not you will ultimately need to market the property before you start bumping up against deadline dates. I wish you the best.
ROSE K. WALSH3/9/11 12:14am I FOUND THIS ARTICLE TO BE EXTREMELY INFORMATIVE. MOST OF THE QUESTIONS I HAD WERE ANSWERED FOR ME IN A WAY THAT I WAS ABLE TO UNDERSTAND MORE SO THAN THE BANK WHICH HOLDS THE MORTGAGE, AND EVEN MY ATTORNEY.
M.Statleh3/21/11 3:04am Why do reverse mortgage articles always omit that if you are at nursing home for a certain amount of time, you will lose your home. Please elaborate on this great risk.
Michael Branson 3/21/11 7:48pm There is no intended omission and we have tried to always be clear about this aspect of reverse mortgages. You don’t “lose your home” if you go to a nursing home, but if you permanently move out of the property, then the reverse mortgage becomes due and payable. According to the loan documents, “permanently” occurs once the last remaining borrower has moved from the home for a period of more than 12 consecutive months. Once this event occurs, then the borrower or the borrower’s heirs have the option of paying the loan off and keeping the property or selling the home and retaining any remaining equity.If the home is worth less than the mortgage loan, then the heirs and the borrowers will never have to pay more than the property can be sold to a bona fide third party due to the non-recourse nature of the loan. In other words, no matter how much money the borrower(s) took out of the property, no matter how much the property values have dropped, the borrower(s) or the heirs can work with the lender to sell the home and not have to pay any shortfall as a result of the sale. All remaining equity if the home is worth more than the remaining loans still belongs to the borrower(s) and their heirs.The reverse mortgage was always intended to allow senior borrowers to remain in their homes for the rest of their lives. If other circumstances dictate that they leave, the reverse mortgage does not provide for a payment free loan for the borrower’s heirs beyond the time when the borrower will live in the home. No one can predict future property values and so no one knows if there will be a large amount of equity left when the borrower does leave the home or if the equity will be depleted due to falling property values and a rising principal balance. However, we have seen borrowers with little or no equity left after the huge decreases in values we’ve just gone though with traditional forward mortgages as well.
Rob with Response4/26/11 6:44pm After the “passing” of the last remaining borrower in the case of a condo, who is responsible for payment of: Association dues, Utilites, Unit owner Insuance …? If the unit does not sell, is is the mortgage/bank’s responsibility…? Or would it be assigned to the “estateor heirs” – RobThe property passes to the original owners heirs in accordance with the owners wishes. Any ancillary debts on the estate (dues, utilities, etc.) would be the responsibility of the new owners of the property. Now having said that, if the property did not sell, the creditors for debts incurred by the original owner for services other than the reverse mortgage would be most likely place liens on the property to protect their interest in the event of non-payment. We can tell you that the lender cannot seek repayment of the reverse mortgage from any other source than from the property itself due to the non-recourse nature of the loan. The only way to know for sure what rights you or other debtors would have in your state with regard to collection efforts against the estate, would be to seek competent legal counsel in your area. – Michael Branson

Reverse Mortgages: What Happens After Death? By Mike Branson – Add me to your circles

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56 Responses to “Reverse Mortgages: What Happens After Death?”

  1. tonya says:

    What if my father and step mother had a reverse mortgage and step mother passed away February 2011 and father passed away November 2011 who would be the heirs. Would it be both me or my stepsisters or both.

  2. Karen9896 says:

    What happens when you have bad credit and an unsteady work history and you live in a house that has a reverse mortgage on it and the person is dying that took out the loan. We have lived in the house with him, caring for him with many health issues for years. We have lived with him and his deceased spouse for 28 years and I am listed on the deed with him as well since I am his son. Now that his end is near what happens now. We want to keep the house, he has it in his will that he wants the house to go to myself and my wife and the reverse mortgage is for $120,000.00 but the house is still valued at around $280,000.00 according to the mortgage company which means the available balance is greater than the balance owed. Can I as part owner get an equity loan on the remaining available balance of the house to pay off the reverse mortgage so we don’t lose the house??? Time is very short and we need answers now…Please offer advise, it is appreciated greatly…thanks

  3. admin says:

    Hi Karen,
    If you are over 62 and on the original reverse mortgage as you should have been if you are currently on title, then nothing would have to be done. However, if you were added to title later and the lender simply did not notice the title change (since that would have triggered them to call the Note due and payable when the title changed), then you still have options as the property owner when you do become the full owner.

    Firstly, if you are over 62, you can see about getting a reverse mortgage in your own name. If the balance on the existing loan is just $120,000 and the value of the property is $280,000, you may be able to qualify for a reverse mortgage in your own name. If you are not 62 or over, then a reverse mortgage is not an option for you at this time.

    If your age will not allow you to apply for a reverse mortgage and you do not believe that your income and credit history will qualify you for a conventional loan even at a 45% loan to value, then you still have the same options as every other individual who inherits a property but cannot keep it for one reason or another. You have all the rights to the equity and can sell the home, use the proceeds to purchase another property or for any purpose you decide but the equity is yours and the lender should have no problem working with you as long as you communicate with them and take positive steps to market the property for a reasonable sales price.

    In this regard, the reverse mortgage is no different than any other loan. The equity is still yours but the loan becomes due and payable when the borrower passes. If you can obtain other financing (whether that be another reverse mortgage or a traditional loan), then you can do so and continue living in the home or you may have to look at other alternatives but the equity is still yours and the decisions are ultimately yours to make.

  4. Nadine Martinez says:

    I wanted to know if my mom took out a reverse morgage on her home and passed away what would happen to my brother who has been promised the home and lives there.He doesn’t have much income and bad credit. No one has told him this and I’m afraid he will be blindsided when she passes away with no where to go.

  5. admin says:

    Nadine,
    Death of the last surviving borrower is a maturity event on the reverse mortgage and the loan then becomes due and payable as a balloon payment. If your mother took a reverse mortgage (or any type of mortgage for that matter) your brother would be in the same position. He should start to rebuild his credit now if he intends on refinancing the reverse mortgage into a conventional loan, otherwise he would have to sell the home assuming he has legal capacity to do so through will, trust probate etc. You generally get a grace period of up to 6 months to refinance or 12 months to sell (with extensions, depending on the reverse mortgage servicer and your communication with them).

  6. Theresa says:

    Where does on go for help on a reverse mortgage when the person passed away who took out the reverse. You have bad credit but want to purchase the home. The home is owed more now than what it is worth.

  7. Richard says:

    Very informative site – thx! My mother took a reverse mortgage on her home approx 10yrs ago, 50k lump sum that has been accruing interest, nearly double now. She had planned to stay in the home until death, but family conditions have necessitated moving her closer to me (from AZ to CA). As best as we can determine, the current reverse mortgage balance is possibly more, approx 5K, than the value of the home based on preliminary research. Mom contacted the lender and they stated she should contact them when she leaves and “they will take it from there”. Can you elaborate on the process, that is, is she required to sell the home or can she do a deed in lieu of foreclosure or? I understand a reverse loan is non-recourse…does that mean she is not responsible for the difference between what the home sells for and balance (if higher) of the reverse mortgage. If that’s the case, would it be simplest to pursue the deed in lieu approach?

  8. admin says:

    Hi Richard,
    Do contact the lender and I’m sure they will go over all of this with you. The mortgage itself is a non-recourse loan and once she leaves the home, they will call the Note due and payable. If she owes more than the property is worth and cannot sell the home to pay the balance, then the only recourse the lender has is to foreclose and sell the property at foreclosure sale. It is in their best interest to work with you on a deed in lieu of foreclosure at this time to avoid the lengthy foreclosure process only to get the property later and incur additional costs.

    Servicers have had to deal with this situation time and again now that values have dropped so drastically and the call will not be a surprise to them. I think you will be happy with how helpful and informative most of them can be.

  9. Richard says:

    Thx for prompt reply. Can the deed in lieu of foreclosure process be initiated prior to her leaving the home? I did speak with the lender today, but they could only provide general info since I don’t have her power of attorney yet. They indicated we should request a non-occupancy ltr, fill it out and return it, when she leaves.

  10. Lil says:

    My mother has a reversed mortgage and passed away a few months ago. My brother lived with her and in her will she stated he had a life time home there. He is disabled and draws disability. Can he refinance the home with Hud based on his income to pay off the reverse mortgage amount based on what he gets a month from disability?

  11. Linda says:

    I have a friend that has a reverse mortgage so if his house with a reverse mortgage goes up for sale can a person over 62 buy it and keep the same reverse mortgage company?

  12. tom says:

    what are the pros & cons to an heir(s) just letting the bank foreclose on the property, rather than try a short sale upon the death of the borrower? the property is about $30K upside down, & the heirs don’t want anything to do with it. also, is it the heir’s responsiblity to continue paying the taxes, insurance, HOA dues, etc. until the bank forecloses? thanks in advance for your response & help.

  13. admin says:

    Hi Linda,

    Reverse Mortgages are not assumable. The property can be bought by a new purchaser over 62 on a new reverse mortgage loan, but they would not be able to just assume the existing loan.

  14. admin says:

    Hi Lil,

    I honestly cannot answer this question with the information provided. If your brother is over 62, he is eligible for a reverse mortgage himself. If he is not yet 62, then he would need to check into what programs are available to him through HUD or other programs to determine what may or may not work for his circumstances. There are many counseling programs that may be able to help your brother and would be knowledgeable about programs offered in his area.

  15. Shelley Cobb says:

    I found this website and all the questions to be very helpful. If you pay attention to all of the questions and answers, you should be set.

  16. Linda Cheramie says:

    My mom passed away on March 18th of 2011
    She had a reverse mortgage
    The house is valued at approx $ 239 with a bal of the reverse mortgage of $ 109,000
    we have the house on the market and we have been communicating with the rms co that handles the mortgage.
    My wife called today for another extention for selling the house and they told her that March 18 is the last day before foreclosure.
    Is this correct since we are trying to see the house and no one from this company ever sent us or notified us that this was the last day before foreclosure starts
    What are our rights?They never sent us one piece of mail or one phone call adising us of this pending date??????

  17. rose says:

    I would like to pay off my reverse mortgage, I have been told by the loan company that is not possible. I finally found it was within the loan documents. I also saw a law governing sale of reverse mortgage property that stated reverse mortgaged property can be sold for 5% less than appraised value. I cannot find that law number now. Can you help with that.

  18. la marina says:

    Very well written article. I agree with you and I had sold off 75% of my equity unit trusts for the past 2 weeks.

  19. Lori says:

    My Aunt got a reverse mortgage maybe about 10 years ago and used up all her money then had to file bankruptsy. She has passed away 1 year ago and my sister who took care of her her last 2 months and (also my aunt gave her a place to live) still lives in the house!!!!! I am not sure how this works and need advise. I do not have contact with my sister and I do know my mom is the heir on the house and is afraid of my sister, what if the bank finds out she has been living there all this time? I do not know if she is paying taxes or insurance etc?? Thank you for your help!

  20. Lisa says:

    I am now 53 years old my mom is 82, and has a reverse mortgage,If she lives 10 more years and I arrive to the age of 62 will I her heir be allowed to pull another reverse mortgage over the same property?? the property now is worth less than the amount owed

  21. Mike Branson says:

    Hi Theresa,

    The heirs of the borrower have the option to keep the home, to sell the home or to let the lender have the property back and then they will sell it. Regardless if the heirs or the lender want to sell the home, they would get an appraisal or current market analysis of the value and list for current market prices…not the balance of what was owed on the reverse mortgage. The heirs may not want to sell though, so you may have to wait and see if a for sale sign goes up on the property.

  22. Mike Branson says:

    You can execute a Deed In lieu at any time, the question really is: Why would you until she is fully moved and the property is vacant? Once you execute the Deed, they own the property and all your options are gone. I think they have given you a good path and things can move quickly once she has vacated and everything is fully moved out of the home.

  23. Mike Branson says:

    Hi Lil,

    I honestly can’t say whether or not his income and circumstances will qualify him for any set loan amount, but the general answer is Yes, he absolutely can refinance the loan in his own name as her heir and pay off the loan and continue to live there. Also, if the balance is higher than the property is worth, he can get the home for 95% of the current market value. As far as qualification, he needs to contact a lender who does regular forward loans (and I am sorry, I don’t know who to recommend for any special disability programs but HUD may be able to help him there).

  24. Mike Branson says:

    Hi Linda,

    I’m not sure I understand 100% what you are asking but I think you are asking if his reverse mortgage can be assumed and the answer to that is no, it cannot. The new owner would have to apply for and get a new loan of their own. They can go through the same company if they wish, but they would not be limited to just that company.

  25. Mike Branson says:

    Hi Tom,

    In all honesty, there are very few “Pro’s” to the heirs stepping in and doing the short sale on their own. Once the borrower passes, there is no worry about the borrower’s credit rating anymore and therefore, having the bank foreclose or take a Deed in Lieu of Foreclosure has no effect on anyone. The only real pro’s are if the home is being used for housing for a family member during the time and the additional 9 – 12 months helps the heirs in some way.

    With regard to the “responsibility” for other debts, that gets a bit more tricky. If the property is ever deeded to the heirs, then it becomes their property and their responsibility. However, if the property stays in the name of the deceased relative and never passes to the heir, then it remains their debt. I am not an attorney and this is something that you should speak to an attorney about. The reverse mortgage is a non-recourse loan. In other words, the lender can never go back after anything other than the property to seek repayment – they cannot attach any other assets to repay the debt. I don’t know if any of the other obligations have the same restrictions and therefore, I cannot comment on whether or not any of those creditors can seek repayment from the estate of the deceased.

  26. Stan Wisneski says:

    What document in the reverse mortgage paperwork specifically indicates that the mortgage is non-recourse and that the heirs are not responsible or liable for a deficiency balance when the property is sold?

    Thank you,
    Stan Wisneski

  27. Mike Branson says:

    Item 10 in the Deed of Trust and 4 (c) of the Note are the agreement between the borrower and the lender and both clearly state that there can be no deficiency judgment, that the loan is non-recourse and the property is the only recourse for the payment of the obligation.

    There is no verbiage in the Note or Deed that binds or fails to bind an heir. Borrowers could not legally bind any heirs and the borrower’s promise to pay is clearly detailed in the Note and Deed.

  28. Josh says:

    Hey Mike, first off, appreciate all the help you have been giving!

    My question is this..
    My grandmother passed away and had a reverse mortgage, and at the time of borrowing got a 275k loan, but got paid monthly. She had borrowed 210k so far of the loan, and the house now is only worth about 175k. Am I entitled to the last 55k that she was originally approved for? (I am the sole heir and estate) If we sell the house, we will only be able to get 170k, which is less than what she has already borrowed. I thought that the money was gone, but the reason I am asking is because we got a notice in the mail saying that the “Net Credit Line Set Aside + Net Principal Limit = 50k Total Funds Available”. That was addressed to the “Estate of” and got me wondering. Thanks again!

  29. Mike Branson says:

    Hi Josh,

    Once the lender is aware of the passing of the borrower, no further disbursements are made. They will send the statement out addressed now to you, but it is probably a pre-printed form and thus it would still show the funds “available” as they would be available to the borrower even though your name is now inserted. Keep in mind that if you wish to keep the home, you can pay off the existing loan for 95% ($166,250) of the current value and not the $210,000 that you say she borrowed. If you choose not to keep the home, it is entirely up to you whether you want to sell the home at this time or let the lender worry about it. If the house will only sell for less than what is owed on it and you do not want to keep it, you may not want the work and responsibility and that would be your call.

  30. Elena says:

    Dear Mike,

    First of all, thank you for all the information you have provided on this website. Your answers to others have been very informative. You have probably touched on aspects of my mother’s scenario in various answers, but if I could get confirmation for her specific situation, I would be most appreciative.

    My mother and father took out a reverse mortgage on their home in 2007 when property values were high. They took out a lump sum, began receiving monthly payments, and also had a large LOC available to be drawn upon.

    Last year, my father passed away. At the beginning of this year, my mother took the balance of the LOC that was available to her in a lump sum. Those funds are in a money market account which she uses to pay her living expenses. Other than social security, and an annuity (which she hasn’t annuitized), the reverse mortgage funds are all she has for living expenses. The upkeep on the house (taxes, insurance, maintenance, utilities, etc.) is expensive, and she also pays caregivers for help during the day. She is starting to feel like it’s all too much and too expensive for her and would like to consider moving into an assisted living facility near one of my sisters (in another state).

    Here’s the issue and my questions: Because of the depressed real estate market, the value of her house is worth half as much as the amount she has taken for the reverse mortgage. I understand that the RM is a non-recourse loan. Does this mean, if she needs to move to an assisted living facility and does a deed-in-lieu of foreclosure, the bank cannot take any of the other funds in her possession — even if the funds she currently has in an account came from the line of credit on her reverse mortgage?

    We (her children/heirs) are not interested in preserving assets for an inheritance. We are only concerned with her having funds to pay for her care and living expenses.

    Thank you for your time and all the information you have provided!
    Elena

  31. Mike Branson says:

    Hi Elena,

    The bank can only look to the property for repayment of the loan. All borrowers who take the funds from their reverse mortgage and then either pass or must permanently leave the home for a care facility in the future are in the same situation if their property value has gone down, regardless of when then took the last draw available to them. HUD will have to pay the claim to the lender and that would not make your mother eligible for another reverse mortgage (or any other federally insured loan program) in the future, but let’s be honest, will that make any difference to her now? If she is moving into a care facility, then she is not concerned with purchasing another home in the future and so she will not be looking to purchase another property.

    The terms of the loan were agreed upon at the time your mother and father first took out the loan. This is exactly why borrowers pay for the up-front mortgage insurance and why there is an annual renewal. We often have borrowers who do not believe the charges are warranted, but when you see a situation like this, where the value has dropped so significantly, the borrowers were able to live in the home without having to pay any mortgage payments and now regardless of any funds left over they cannot be made to pay more than the property is worth, the mortgage insurance costs were a very wise investment. You can read more about the insurance in this post.

  32. Elena says:

    Hi Mike,

    Thank you for your prompt reply. I’m relieved to hear confirmation of what I hoped was the case in the event she needs to vacate the house for different living arrangements. When/if that time comes, we will contact the lender to discuss the sale or deed-in-lieu of foreclosure to satisfy the terms of the reverse mortgage.

    My parents were very fortunate to have taken out their reverse mortgage when they did.

    Thank you again for your time, knowledge and advice.

    Warm regards,
    Elena

  33. Lorene Butler says:

    Hello Mike, First of all, Thank you for having this blog site I have been so stressed with all this reverse mortgage. My mother passed away in April this year and she had a reverse mortgage that I insisted she get for she could live more comfortably and without worries. I was happy that she could do this and told never to worry about later, I would be okay. Easier said than done and sooner than what I expected she was gone. This has been my home since day 1, I have left and came back but this is what my mother and father have left me. I understand more about the reverse mortgage after reading everyone’s questions and your answers and I thank you for relieving the pressure a little. I wanted to ask you that if my mother left a will and everything goes to me, but I didn’t work to care for my mother, so my husband is going to try to buy it for me do I still have to probate the will and do you know what that costs if I do? Also, since my husband is going to be a first time buyer, and has a good credit score, and has worked for his company for 18 years, is there going to have to a percentage downpayment and if so is there anyone that could help us with this? His credit score is good but he only has one debit on his report and there telling us that he doesn’t have any credit so noone will finance us. Can you guide us in the right direction. Appreciate any information you give us and Thank you very much again.
    Sincerely,

    Lorene

  34. Mike Branson says:

    Hi Lorene,

    I have not done any forward mortgages for quite some time now as we have been concentrating on the reverse mortgage product, but HUD always allowed borrowers to establish “alternative credit”. In other words, for borrowers with only one existing line of credit, you could show other items that you regularly paid on time such as insurance premiums, utilities, etc. to also verify timely payment of obligation. The two of you should be able to qualify together and with his job stability, you should be a good candidate for an FHA loan. I would contact an FHA loan specialist in your area.

    With regard to any probate issues, I’m sorry, I do not know the laws for every state (nor even from what state you are writing), and am not allowed to give legal advice even if I thought I did know that answer. You should contact a local attorney and there are probably low cost legal counselors or clinics available that would be able to help with something as straight forward as probation questions if you check into it.

    I wish you the best.

    Mike

  35. Brian Schmelig says:

    Hello Mike,
    Great site with great information. My situation is this, Grandma and Grandpa took out a reverse mortgage several years ago, I believe 2006 just before the down turn in real estate values. Grandpa died about a year after, and at the end of this month grandma is moving into an assisted living complex due to health reasons. My wife and I would like to buy the property, although the value is less than the mortgage balance by approximately thirty to fifty thousand dollars. Grandpa literally built the house 63 years ago, so you understand there is sentimental reasons behind our purchase. From what I have read if grandma is out of the house more than 12 months the mortgage balance is due. We would love to buy the house prior to this time but will probably only be able to get loan approval for appraised value. Will the reverse mortgage company require us to pay the full balance because we are family, or will they approve the sale at appraised value so they won’t have to worry about foreclosure. Additionally, will grandma be liable for the balance if they do approve it. My father is the power of attorney and he stated they have a year to sell once she has moved and we would only have to pay appraised value, I am concerned he is mistaken and was told the third party purchaser rule.

  36. Mike Branson says:

    Hi Brian,

    I think you will be very happy with this answer! HUD will allow you to purchase the home at 95% of the current market value. If HUD had to take the property back and sell it, they would incur costs of 5% or more not to mention the time the home sat on the market. My advice to you is to start looking at sales of similar homes in the area and contact a lender to become pre-approved for financing in the amount you would need based on 95% of the sale prices of similar properties. Then you and your family can approach the lender with the offer to purchase and have everything ready when the time comes.

    The reverse mortgage is a non-recourse loan. Your grandparents paid mortgage insurance to guarantee that the only recourse the lender had was the property. The lender cannot seek repayment of any shortfall amount form any of your grandmother’s other assets.

    These are some of the great benefits that so many writers for magazines, newspapers and other news sources often ignore. You see the sensational headlines of the borrower who got a reverse mortgage, invested the money in a risky investment and then was penniless when they had no equity in their home and all too often the writers blame everything on the reverse mortgage. I like to point out situations just like yours. Your grandparents took out the loan in 2006 and so they lived in the home for about 6 years and never had to make a monthly payment. The values and therefore equity in the homes during this time frame plummeted for all homeowners. However, your grandparents either had the money that they were able to take out of the property with the reverse mortgage or did not have to pay to their last mortgage lien holder and were able to live in the home he built and they loved. Now, with the values being down so much, all borrowers have lost significant equity – but that has nothing to do with the type of mortgages they have. But since your grandparents took out a reverse mortgage, you have a chance to buy the home for 95% of the current market value and your grandmother and your family will never have to worry about the shortfall of the reverse mortgage. Looks like everyone won as much as possible in a market where housing values dropped so significantly. I wish you folks all the best.

  37. April says:

    So, my aunt is dying, and is the surviving spouse on a reverse mortgage. There’s still approximately $3,500. on the line of credit. She will also be out of the house for 12months starting in January when the bank will call the loan payable and due.

    Given the current market, I think I could advertise the house for approximately $20,000 -30,000 more than owed to-date. I don’t want to pay any extra fees such as closing costs (and I noticed no funds were held in escrow at the beginning of the reverse mortgage), nor do I want to hire a real estate agent to sell the house.

    Can I do all of this myself? And, if so, what hidden costs may I be missing in consideration of selling her house at this time instead of waiting until her death, or when the bank calls in the loan?

  38. Mike Branson says:

    Hi April,

    I’m sorry, I’m not trying to duck your question but I really can’t answer it. You may have no hidden costs, but you may have repairs, low offers, problems in contracts that they just didn’t know about or other things come up that you can’t see in advance. Some people who sell by owner wind up doing great for themselves and some not so well. I really could not begin to know how it would work out for you. You might check some local blogs to see if people did well with “help you sell” type programs that help with contracts etc. but don’t charge anywhere near as much money and see if they were pleased. I for one believe in letting a professional guide me through transactions of which I am not completely familiar so I would be hard-pressed to recommend that you do something on your own blindly. I’m sorry if this is not much help.

  39. Wanda Arocho says:

    Hi Mike,

    I am so glad I came upon your site. My dad passed away last month. I am his heir.
    He took out a reverse mortgage in 2006 and now what is owed is 200k. I looked up my home’s value and it is worth. 188K. You said that HUD will allow me to purchase my home at 95% of the current market value. When I contact the lender and send them the death certificate, do I write them and tell them up front I want to purchase my home for what it’s worth on today’s market? Should I have it appraised, or go by the real estate market? I am going to lender and apply for a loan. I am going to hire an attorney. I am scared I will lose my home. I am a wreck thinking about this, plus I am mourning my father’s passing, it was sudden. Thank you for any advice you can give me regarding my situation. Sincerely Wanda

  40. Mike Branson says:

    Hi Wanda,

    When you say that you looked up the value, I don’t know what resource you used, but the lender and HUD will use a licensed appraiser. There is no sense in you paying for an appraisal now as they will order one themselves and so the additional cost is not needed at this time. The lender and HUD both know that they can only sell the property for current market value and that there will be a minimum of 5% or more in costs to market and sell the home anyway and the longer the home goes unsold, the higher those costs climb. They are only too happy to allow you to keep the home at this time for the 95% of the current value as it actually saves them time and money as well. Contact the lender as soon as possible (especially with a pre-approval letter showing them you have already been approved for the new financing if possible) and let them know of your desire to keep the home.

    As I said, they will verify the value and approve your request based on the payoff computed on their current value. If you believe that the value they assign is wrong, you can always look for an independent opinion later and counter their opinion of value. In the end, they do not want to manage the liquidation of property and so they should be reasonable with their value. As I stated, they know they can’t sell a home for more than the current market will allow so there is no incentive for them to lose an opportunity to accept the payoff and move on.

  41. Donald Harper says:

    Hi Mike Banson, I have read the information that was provided to the website and the questions and responses. I am concerned that there is some contradictory information here and would like you to offer some clarification which will help me better understand what happens to my mothers home and the possible sale to grandchildren. Since the text on this website states in one paragraph that the loan is non-recourse and the balance is not due to the lender by the heirs of the estate for a shortfall on the reverse mortage, (appraised value of the home vs the loan amount), if the house is sold to a third party. However, in the same paragraph and in brackets it states that there are no restrictions on family members and that the home can be sold to family members at 95% of the appraised value. I have also noted that in some of your responses you have mentioned that grandchilden and heirs can purchase the home at 95% of the appraised value. Here is my situation: My mother passed away in August 2012 with a reverse mortage balance of 230k. The original mortgage could go as far as approximately 270k. I have kept in contact with the lender and have rented the home, kept up the property taxes and made improvements on the home and kept up the property. I cannot afford to purchase the home but two of the heirs (grandchildren) are in the process of gaining loans to purchase the property at 95% of the lenders appraisal of 140k. Due to the contradicting verbiage and due to the responses given to others questions above I am not sure if this home can or cannot be sold to my mothers grandchildren. Could you help clarify this for me. Best Regards, Don Harper

  42. Paul says:

    This discussion has really been helpful. My father did a reverse mortgage some years ago while his wife was still alive. She has passed and he is 93 and his health is shaky. My sister and her family have been living with him since just before our mother passed. I am the executor of his will and want to not be surprised upon his passing. My sister’s credit is not so good. My father has a simple will that basically leaves his estate to the 3 of us ( also have a brother) equally. Here’s my question/s. My sister wants to stay in the house so the question is how long do we the heirs have to resolve her desire to stay. Will she bid on the market value or just the amount owed to the leader by the estate? What can be done about trying to be fair about splitting any proceeds equally among us three? And finally, because there is really no other real property in his estate nor is their much money in his bank account, how will the on going bills be paid until all this is resolved?

  43. Mike Branson says:

    Hi Paul,

    I think I should go at this question backward and start with the end of your question and work may way back to the beginning. I can’t really comment on how you guys should allocate the expenses or a “fair split” of the proceeds. Seems to me that if one of you is currently living in the property that individual should be responsible for the expenses on the home while there since those expenses would be incurred on their home no matter where that individual lived, but you all have to agree on that. There are no provisions in the reverse mortgage documents to make that determination.

    When the time comes and your father passes, the loan becomes due and payable at that time. However, each lender is a little different in how they will work with the heirs regarding giving them time to pay off the loan or sell the property. If the loan is the HUD HECM reverse mortgage, the lender also has to contact HUD and obtain their permission before they can begin any actions such as foreclosure. At any rate, while speaking with servicers, they indicated that they work with borrowers typically in 3 month increments up to a year before they will take any further action as long as they are satisfied that the heirs are taking positive steps to retire the debt.

    Heirs can pay off the existing loan by paying the lesser of the mortgage balance owed or 95% of the current value of the home. In other words, if the house is worth $200,000 and due to the values dropping your reverse mortgage balance is $235,000, your sister can take the home for $190,000. HUD allows this because they know if you don’t retain the home and they have to sell it themselves, they cannot sell it for more than current market value anyway and there will be costs they incur to sell the property. However, if the balance owed is $100,000 and the value is $200,000, then payment in full of $100,000 is required on the loan.

    My guess is that you would have to determine first the fair market value of the property and the balance owed on the reverse mortgage to determine what the equity, if any, is. I am not an attorney and I do not know how the will outlines the duties of the executor so I don’t know if any monies owed from a sale would go to you for distribution to your siblings or if all three of you would be paid equally from the escrow closing. For that question I would advise you to seek competent legal counsel.

  44. Sandra McCarthy says:

    What a blessing to find this website and all of the helpful information it contains. I came here after a Google search looking for help with my situation. I did not see anyone else with the same problem (thank goodness they are not in my mess). I have a reverse mortgage and all the funds have been used up (paying off old debts of my husband and parents during illness and death. There was still a debt to the state for the last few months of my father’s healthcare in a facility and the state is threatening to force sale of my property to pay the bill. Am I at all protected by the Reverse Mortgage so that I won’t be homeless? Does the RM take precedence and perhaps discourage the court from allowing the judgement to the State to take this action?

  45. Mike Branson says:

    Hello Donald,

    Great question. I’ve answered you in a new blog post you can find here.

  46. Kim says:

    Hello Mike,
    I am hoping you can help.. upon my mothers passing 1 1/2 years ago..I made the decision to let her reverse mortgage property foreclose..I made it clear to the bank that i was not interested in buying or selling or going to probate court.(she had no will) I was told by doing this I would not have no further ties to property or repayment of loan…much to my suprise the property sold with a substancial surplus..I now have law office(saying they were in charge of the sale of my mothers home) and private investigators trying to locate me and telling me i am intitled to this surplus..The mortgage company still tells me i have no rights…I feel this may be a scam? They seem to be in such a hurry to get me my money and call 5 times a day..The last message they said that if i didnt let them distribute this $ it will go to the state and i will never see it…Seems shady..Do you know if it is possible that I am entitled to this surplus in this situation?

  47. Mike Branson says:

    Hi Kim,

    I can’t comment on the foreclosure process in any given state but there is a possibility that you have money coming to you. The way that the foreclosure sales work that I am familiar with is that the starting bid is what is owed to the lender plus all costs incurred by the lender. If no one bids any higher, the property goes back to the lender and the lender takes title by Sheriff’s Deed Upon Sale and there is no money left over for the property owners (or their heirs). However, if others attend the auction and bid on the property as well so that the final purchase price is higher than the amount owed to the lender, any money received over the amount owed to the lender would go to the property owner.

    If your mother’s home sold for more than what was owed on it, then there would be more money that would be paid to your mother or to her heirs. If you are afraid that it might be a scam, it might be wise to have a local attorney check into the matter for you. I do not know what the amount of the proceeds from the sale equal and I do not know what the attorney would cost, but it would seem to me that an initial inquiry to see if it is worth your effort certainly shouldn’t take more than a half hour so the cost might well be worth it to settle and you may have a tidy sum coming to you.

  48. Kim says:

    Mike..thank you I appeciate your response..I will for sure see what the attorney says

  49. Norman says:

    What happens when Condo fees are due and they come after the heir(That is on the Deed) to pay them???

  50. Mike Branson says:

    Hi Norman,

    I am not an attorney and I would suggest you contact competent legal advice, but I would assume that it all depends on what the heir intends to do with the property. The heir did not sign anything to the condo association agreeing to make any payments so if the heir chooses not to exercise his/her right to take the property, my guess is that they would also be responsible for any amounts owed to others. If, however, there was no equity and the heir chose to allow the lender to take the property, then I cannot image any heirs being responsible for the debt.

    The reverse mortgage lender can only look to the property to repay the obligation. I cannot advise, nor do I honestly know, what rights other debtors might have with regard to seeking repayment from the borrowers’ estate. This is where just a quick inquiry to an attorney licensed in the state where the property is located may save you a lot of grief and money once you know the laws.

  51. Percy says:

    Hi. I am leaving in an apartment for almost 9 years with the owners living in the first floor, later on they took a reverse mortgage,now both of them passed, who should collect the rent? Since one of the heir contacted me and told me that the value of the loan is too high they cannot afford to repay it back, please help,

  52. Mike Branson says:

    Hi Percy,

    I really cannot advise you except to tell you from whom you should seek advice. If the heirs are not going to work with the lender to sell or finance the property, then the bank will be forced to either foreclose and take the property or take a deed in lieu of foreclosure from the current owners. Either way, they will have to market the property and sell it to a new owner. At that time, I do not know what your status will be. I don’t know what the laws require, what the lender will want to do or what your goals are so I can only tell you the same thing I advise other folks – talk to a competent lawyer in your area. You may have rights as a tenant, you may want to start making payments to the lender as most Deeds of Trust also contain an assignment of rents but I don’t know what the best procedure to follow in any case would be. An attorney can advise you of your rights and duties as a tenant and also may help you prepare for any eventuality before it is too late.

  53. Steve E says:

    I am one of those heirs who inherited a deceased parent’s home that has a RM with a balance that is ‘underwater’ compared to home value. This previously widowed parent passed in November 2011 at age 90, 2 years after taking out the HECM. A big chunk of the loan was an up front lump sum advance to pay off an existing HELOC, and after that he received monthly tenure checks. Of course the original appraised value is about twice what it could realistically sell for today. The property is in Delaware, heirs are in California and Arizona, so not only do we not have any interest in retaining the property, but are too far away to personally take care of the property and can’t afford the costs of upkeep. Also the home has some repair issues, and sits on 2 acres that need to be mowed in the summer and leaves to be raked in the fall. I won’t mention lenders’ name, but after the borrower died we offered to sign deed in lieu but they refused, and said don’t worry, we’ll just foreclose. Never heard a thing after that for over a year. But instead of foreclosing, they just let it sit and run up more interest and fees, never contacting us again, then sold the note to another servicer last November, one year after the borrower’s death and after the estate was probated. Then this last March they filed foreclosure in court, having never tried contacting us. So now we’re in the middle of the foreclosure process. But there are two heirs involved. We own the property together in equal shares, named as ‘co-defendants’, and one, my sister, has so far refused to reply to the suit. So it drags on until either she replies or they rule by default. I get the non-recourse part, but I’m just concerned that we may get dinged for attorney fees and court costs. There were only enough other assets left in the estate to pay the probate lawyer and a few other small debts, so any assessment against the heirs will come out of our pocket. Am I right to be worried about those court costs?

  54. Ashley Clark says:

    Hi my question is we live in a row home attached to a home that has been abandoned for about 10 years now. No one has stepped foot inside that house since she passed there are still dishes in her sink. I have found out that the lady who lived there had a reverse mortgage. The lack of care is now effecting the house in which we rent. We have informed our landlords and they say they care but nothing has been done. I finally got someone from the township to come out and cut the grass, but there are bees and wasps and Mosquitos (cause all of the gutters are clogged and water just popes out when it rains) so I can’t send the children out to play. As well we have had exterminators out but nothing they do can help the spiders and such that find there way over as well as our new addition a bat in the attic. We need to move but I have no idea who to contact what are my rights. We sleep in the downstairs cause we get eaten alive when we sleep. My children are afraid to sleep in their rooms. I as well being a single mother don’t have they money to just pick up my kids and find another place to live. So my question is what are my rights if any and how would I go about this in the correct manor?
    Thank you,
    Ashley Clark
    Concerned Mama Bear

  55. Mike Branson says:

    Hi Ashley,

    I’m sorry but this really is not a topic concerning the reverse mortgage but rather tenant’s rights and that is a legal issue that I am not qualified to address. Have you tried finding out who the legal owner of the property is now? Regardless of what type of loan the previous owner had, if the heirs did not step forward to pay off the loan at the time the owner passed, then the lender would have had to take the property back by way of foreclosure and then dispose of the property to pay the debt. If the owner passed 10 years ago, there is no way for me to know if the owner’s heirs paid off the original loan and then they have left the property in disrepair in the meantime, if the lender took title to the property, was unable to gain title for some reason or what. I would suggest that you check public records to determine who owns the property now and then find out what recourse you have against the current owner. Possibly the Township can begin abatement proceedings against the current owner for the maintenance and health issues but again, that’s a legal question that has nothing to do with the terms of the reverse mortgage.

    I do wish you luck.

  56. Mike Branson says:

    Hi Steve,

    I’m sorry, I’m not 100% sure I understand what you are asking. I think you are saying you used a VA loan to purchase your property and would like to know if you refinance now and later pass, would your wife have to sell the home, is that correct? If so, I have to assume that there is some reason you either do not want to add her to title at the time you do the refinance or cannot (perhaps she is not yet 62). If she is 62 and eligible for a reverse mortgage also, even if you purchased the home on your own you could add her when you got the reverse mortgage and then there would be no issues later if you passed, as long as either of the two of you still lived in the home it would be fine. If you could not add her now and she was still not on title, then yes, if you passed at a later date, the loan would become due and payable and if your wife had no way to refinance the loan with a loan in her own name at that time, then she would have to sell the property.