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.

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!

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.

Thank you,
Stan Wisneski

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.

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.

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).

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.