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Hello Katherine,

If your sister removed your mother from the title to the property, the lender will be notified, and the loan will likely be called due and payable. Once the original borrower (your mother) is no longer on the title, the reverse mortgage becomes due.

On a related note, I cannot provide legal advice, so I strongly recommend you consult with an estate attorney. However, based on my understanding, someone cannot use a Power of Attorney (POA) to perform self-serving acts. In other words, by transferring the property title to herself, your sister may not only risk the status of the reverse mortgage but also create a potential cloud on the title. This could lead to issues with title insurance, making it difficult to sell or refinance the property in the future.

Since I’m not an attorney and don’t know the specifics of your state’s laws, I can’t say for certain. However, I believe it’s worth investigating this matter with a qualified attorney before the lender calls the loan due and payable, which could lead to further complications with selling or refinancing the property if there are title issues.

I am the sole trustee of a home that was placed in a revocable trust by my mother. She passed in 2017, and I have been living in the home, paying 2 loans (motorhome and HELOC) she had, and fixing it up. I would like to get a HECM mainly to pay off the loans of $200K total, and the home is currently valued at $1.9M. Can I do this while leaving the home under the original trust name without putting it under my name? A retitle would trigger a reassessment in CA, which I do not want to occur.

Hello Bill,

It is possible, but that would depend on the terms of the trust itself. All trusts must meet the eligibility criteria as published by HUD. The trust would be reviewed and approved, but that could be done in advance. Also, if the trust is amendable, if there are changes required to make the trust acceptable, it is possible that the trust could be amended if there are just some small changes required. The only way to know for sure is to have the trust reviewed.

Hello Janet,

HUD does not have a requirement in this area about the funds, but the lender will want to be sure that the funds are going to the correct party.  Therefore, if the borrower has the title to the property in their trust and wishes to have the funds sent directly to them in an account that they are solely on that is tied to the property address that is not vested in the trust, the lender will probably have no problem with this request. 

However, if there are others on the account or the address is someplace other than the property address, the lender may not wish to take that chance with the borrower’s funds.  You would need to contact the lender to request any special handling but if the name on the account is solely to the borrower(s) on the loan and it is tied to the property, I do not believe your lender would have an issue with that request.

The lender will only reject the trust if it does not meet the HUD requirements.  They have no reason to reject a trust that complies with the requirements that HUD has set forth because the title to the home is not impaired and does not represent a risk to the lender.  I am assuming here that the reverse mortgage is already in place, correct?  If that is the case, the trust cannot be written so that the title of the home changes so that you are the current trustor (property owner).  There is no problem with the trust naming you as the heir or beneficiary when mom passes but if the title to the property were to change at this time, that would be the reason for the trust to be denied by the lender (even if the title approved the trust, it would not be acceptable to keep the current loan without prompting the due and payable provision in the Note and Deed of Trust).  

Just because the trust meets all “guidelines”, doesn’t mean that you can remove mom from the title on a current loan without the lender calling the loan due and payable.  And just to be clear, mom owns the property so she can do whatever she wants with it.  You can recharge the title into the trust if you want even, it if doesn’t meet HUD or lender requirements.  The risk you run is that an improper change of title (which a change to an unapproved trust would be) would cause the lender to call the loan due and payable and if the loan were not paid off either by the sale of the home or with other funds (a new loan or with funds available to you), then the lender would begin foreclosure proceedings.  But remember, when mom no longer occupies the home as her primary residence, the home becomes due and payable as well.  You will need to consider a sale, refinance, or some other means to pay the existing reverse mortgage loan off.  You are wise to take the steps to resolve any title issues now though because it is so much easier to do it now than later.

Hello Sue,

The loan can only be made to a natural person or their approved trust, not to a corporation.  The largest loan amount depends on the property value, current interest rates, and the borrower’s age but it depends on which program you are considering. 

Borrowers with higher valued properties often look to the jumbo or proprietary programs as those loan amounts can go to $4mil or even $5mil if the property warrants.  Your best bet is to visit our online calculator to determine the largest loan amount for your circumstances.  

Hello Sal,

This is an answer that could go different ways depending on the circumstances.  The first part of my answer to you is yes, you must hold title, or it must be in your trust before you can apply for the reverse mortgage (it cannot be in the LLC when you apply).  That’s the easy part. 

It begins to get cloudier about the length of ownership and even the eligibility when LLCs are involved.  If you own 100% of the LLP, the LLP is for your non-real estate related business and have been living in the home as your principal residence, there should be no time requirements or other issues that would prevent you from applying as soon as you had the title in your names. 

If you are not the sole owners of the LLP, there may be other requirements, but I honestly can’t tell you what all they could possibly entail without knowing how the title is currently vested and the percentage owned by what parties.  It would also depend on the nature of the LLC.  Again, if you are the sole owners of the LLC and you have owned the property for a while and the LLC is not engaged in real estate sales or development, there would probably be no waiting period at all. 

If, however, your LLC is as a homebuilder or an investor of houses to flip and you have not occupied the property as your primary residence in the past and only recently moved in or plan to, the lender may look at the transaction as a bail-out situation and it might not even qualify so it is difficult for me to give you a firm answer with just this information.

Hi Kimberly,

I have a tough time knowing exactly how to answer this because I can’t see the wording you say is “strange” and therefore I don’t know if this is one, I can answer or even should answer. 

My immediate thought is that if the letter from the lender does not state that the loan is in default in any way and that they are solely acknowledging the trust that should have been acknowledged from the start anyway, I would not worry about it.  If there is any provision in the letter that concerns you, ask them to explain it.  Otherwise, I would not be overly concerned but again, I can’t read the letter and I can’t give you legal advice. 

If you feel the letter is in any way threatening or ambiguous, you may wish to have your family attorney review it if you are not comfortable writing the lender yourselves to request an explanation.

Hello Jacqueline,

The duties and authority of the trustee is spelled out in the trust.  I am not an attorney and cannot give you legal advice so I would strongly suggest you have an attorney review the trust to determine what the trustee can legally do and what liability the trustee has to others for any actions he takes. 

I can tell you that a reverse mortgage balance grows over time if he takes all the funds and makes no repayment and a Note against the property might not be worth $200,000 should the loan continue to accrue interest for a long period of time and values decline at some point.

It would not affect him; he could continue to live in the home even if there was no equity but there would be no guarantee that there would be $200,000 available to you later unless you had some other way to assure payment and then the obvious question would be when and how would that happen. I would also suggest that you seek professional assistance with this decision.

Hello Lee, 

I don’t know what you have already signed or when you say pending public auction if that means Trustee’s Sale is scheduled for this Friday or two months from now.  I would certainly suggest that you check with the lender to determine a number of things to see what is in your best interest. 

Firstly, what is owed on the reverse mortgage and what is the current balance of the loan?  If there is more owed than the property is worth, do you really want to try to sell the home at this point because you cannot sell it for enough to repay the loan anyway.  The loan is a non-recourse loan which means if the balance is higher than the value, you can let the lender sell it and walk away owing nothing.

If there is equity in the home, by all means, I would do anything possible to sell the home and keep the equity for the estate and not lose it.  That might mean though that if the foreclosure sale is close, you may need to pay the loan off quickly and then sell the property later to recoup the funds which you can also do but that would require more funds now if you had to come out of pocket to pay the entire balance of the loan and wait to be repaid at the sale of the property.  But it can be done.

Finally, if you have already signed a Deed in Lieu of Foreclosure (which it sounds like you have not), then it may be too late already but if you had, they would not need to complete a foreclosure sale and public auction so you need to see where it is in the process, determine how much time you have and what options are option to you based on your resources and the equity remaining in the property.

Hello Nelson,

Let’s start with the things I cannot tell you.  I cannot give you any tax advice and to determine tax consequences and the best options tax-wise, you really need to consult with a tax professional who is trained in this area of the loan and knows your circumstances (CPA or tax attorney).  I can tell you about the loan. 

Placing the home in a trust is fine as long as the trust meets HUD requirements and your dad is still living in the home as his primary residence.  Typically, the best thing to do is to have the trust reviewed by the lender before a transfer of title has taken place so that the lender does determine that the loan is in default due to a transfer of title if the trust is not acceptable under the terms of the loan.

The reverse mortgage becomes due and payable when the last borrower on the loan no longer lives in the home as their primary residence.  That can happen because the trust is not set up so that dad is still the owner or would be the case when dad passes.  As the heir, you have the option to keep the home or sell it, but the loan is still due and payable at that time. 

You cannot remain in the home under the terms of the existing loan.  You can refinance the loan with a new loan at that time (forward loan or a new reverse mortgage if you and the property both qualify at the time), or you can sell the property if you so desire but the lender will call the loan due and payable pursuant to the terms of the Note and Deed of Trust or Mortgage and you will need to know which way you will proceed and have plans in place to act accordingly. 

You are smart to be looking into your options now, and then set up your plans before the time comes that you need to implement your plan.  It is very difficult to start everything only after the death of a loved one and only then find out that you are not ready for the task ahead of you while you are grieving and your time to act is limited.

I would suggest you have dad write a letter to the lender at this time authorizing you to communicate with them and them with you on all matters pertaining to the loan.  Many times, communication with the lender is delayed because the lender has no authority to communicate with someone and they cannot give you your dad’s personal information without his permission or a court order in most cases which can delay things. 

Also, get a good idea of what you plan to do in advance and do some research with local real estate professionals so you have an idea of the value of the home and keep all of dad’s reverse mortgage statements so that when the time comes you pretty much know what you plan to do and how you are going to do it. 

As far as the lender is concerned, you have the right to pay off the loan at the amount owed or 95% of the current market value, whichever is less.  This means that if the amount owed is less than the value of the property, you would need to pay the full amount owed on the loan but if the amount owed is more than the value of the property, you have the right to pay the loan in full for the lesser amount of 95% of the value of the home.  If the value is not there and you decide you are not selling or keeping the home, you can elect to allow the lender to take the home back in a foreclosure action and neither you nor the estate will owe anything – the only security the lender has is the property. 

I hope this helps you make some decisions and gives you a start.

Hello Virginia,

Since the title is in the name of the trust, the payments may be made to the bank account also in that name.

As it has been explained to me by various title professionals, if title is to be held in a trust, the full title to the property must be vested in the trust.  With an A and B trust, the major difference is that each spouse determines where their portion of the property (the assets of the trust) are to be vested after they pass with a third party and not with the remaining spouse. 

If the rest of the trust meets HUD requirements, this should not create a problem as the lien created by the loan would record before any further change of title.  Just as HUD allows borrowers to add anyone to title, they wish and even take people off of title as long as at least one original borrower remains on title and still occupies the home as their primary residence, a subsequent change of ownership wherein at least one original borrower is still on title (or in this case is a Trustee holding beneficial interest in the trust that holds title).  And this is not the case for the state of Texas as properties in Texas are not eligible to close in a Trust. 

Every trust must be reviewed in advance for HUD acceptability so if you have any questions about your trust, do not be afraid to ask your lender to review your documents in advance of your appraisal, etc. to keep your costs down if you think there may be issues.

Hello Rose,

Anything I mention is strictly a guess as I do not have any details of the purchase.  If the home was sold outright, there would be a Grant Deed recorded and the new owners name would be listed as the legal owner of the property with the county recorder’s office. 

There are other options for selling property though that the legal title of the home is not passed until the buyer completes the transaction.  A lease purchase for example (not to be confused with a lease with an option to purchase) is a residential lease for a specified period but is also a contract for sale that obligates both parties to the terms of a purchase agreement. 

The title would not pass to the new owner until after the contract is fulfilled at the completion of the lease term.  These types of agreements are usually entered into when one party has a home or other assets that must be sold to complete the transaction but wishes to move into the new property immediately. 

It seems that this instrument is a viable option for people who are relocating in many instances and have a home in the state from which they are moving that must be sold.  I have no idea if this is the case in the sale of your grandparents’ home though. 

Have you tried just asking the Trustee if you have questions?

Hello Jane,

I cannot answer all the questions because if the property is not located in Texas, the trust would need to be reviewed for approval and it honestly sounds like the trust would probably meet HUD requirements, but with mom as the current beneficiary of the trust and with you and your siblings as successor beneficiaries. 

There is no problem with you being the trustee.  However, that might still not be the best way to proceed.  If this is how things are structured, it might be that mom is the only current beneficiary and you and your siblings are successor beneficiaries, and you would still inherit the property, but the loan would become due and payable as soon as mom was no longer living in the property as her primary residence (as would be the case if mom passed or was required to move to assisted living for medical reasons). 

If you plan to sell the home at that time anyway and still wish to proceed but need the loan now to do the updates/repairs you reference now, the first step would be to have the trust reviewed to determine that it meets the HUD requirements.  If you are using the POA due to mom not being able to execute legal documents, there are also specific requirements including doctor’s letters to indicate that the POA predates the onset of the condition that prohibits her signing so you will want to discuss that with the lender in advance as well. 

If you are all currently listed with mom as beneficiaries of a non-revocable trust, then the trust would not be eligible for a reverse mortgage and so I would urge you to have it reviewed before you spend money on appraisals, etc.

Hello, 

If mom is the only beneficiary of the trust and occupies the home, there is no problem with you being the trustee or successor beneficiary.  The trust would need to be reviewed and approved to be certain that it meets all HUD requirements.

Hello Denise,

If the trust meets HUD requirements (and most do) there will not be any issues.  Let your attorney know that you have a reverse mortgage, and he/she should know what those requirements are and can be sure to keep them in mind when drafting the trust if it is not already in place. 

Before you make the title change to move the house, send a copy of the trust to the lender so that they can review the trust and grant the approval.  A change of title without the proper approval can be grounds for a due and payable provision so you want to be sure you have their approval before you change the title (and if there needs to be an amendment to make the trust acceptable, it is easy to resolve without concern before the title changes). 

Once you have the approval on the title change, your attorney or a title company can handle recording the Grant Deed from you as individuals to your trust and make sure that it is done so that it does not create a taxable event or change your tax base.

Hello Marie,

I hesitate to defend Champion mortgage and some of the practices about which I have heard but I still need to heed the same caution I give to everyone else about making snap judgements when you don’t have the full story. 

Firstly, I think you need to speak with an attorney if your advisor is not a practicing attorney.  I don’t know what Champion’s concerns are at this point and I do know that laws have changed recently to make it easier to heirs to be able to communicate with lenders after the passing of their loved ones. 

The problem is that lenders can be (and have been) sued if they give unauthorized third parties information about someone’s loan and so they are careful not to get themselves into a position where they may come between heirs.  I do not know if this is a possibility in this case but an attorney advises you if you have given the lender all the information required to make this determination and possibly even assist you with the communication with the lender. 

Secondly, there is no lender I know who charges $300+ per month for a loan of $900!  Without having all the information, I would venture a guess that there may have been a loan on the home at the time your parents closed their reverse mortgage and they used the funds to pay off that loan.  That could account for never any further draws and the monthly accrual of interest on the initial draw needed to pay off their existing loan, but again, that’s just a guess. 

Do mom and dad have a place where they keep all their important papers such as loan closing statements and their monthly reverse mortgage statements?  Perhaps a file cabinet in an office in the home?  If so, it would make it much easier for you to see how the loan closed and all subsequent draws that they took after closing, if any.  They should have also received annual statements and with any luck, they may have kept those statements as well, but I think you would find the monthly statements of more use. 

If the lender has charged amounts that are predatory, the attorney can tell you but it’s going to take this information to make that call anyway.  It is entirely possible to have a reverse mortgage and never draw a dime in cash from the loan though so you cannot assume that they did not get a benefit from the loan in other ways and that the loan was predatory. 

They may just have been able to live in their home for however many number of years with no mortgage payment after using the funds to pay off an existing loan and in some cases, that makes all the difference in the world.

Hello Murray,

If you already have a reverse mortgage and you now want to transfer the title of the home into the trust, you just need to send the trust to your servicer and have them review the trust for approval. 

Do not make any changes in your title until after you receive approval from your lender. 

The chances are very good that your request will be approved but occasionally, lenders receive trusts that do not meet HUD guidelines and if you were to transfer your property ownership in the trust that is not acceptable, the lender would need to call the loan due and payable if you did not transfer it back out of the trust immediately. 

Whereas if you have the trust approved in advance, there are no issues and the transfer to the trust can then be made by your attorney or a title company without fear of jeopardizing your loan.

Hello Richard,

I am sorry but I am not an attorney and really cannot give you legal advice.  I can tell you that she can only work with the lender on the property if she has either the legal documentation to show that Dad appointed her the legal right to do so, or she has obtained a court appointed role somehow. 

If you believe your sister is not acting in accordance with your father’s directives or is not acting as she should as the trustee of your father’s estate, I suggest that you contact an estate attorney so that you will know what your rights and obligations are at this point.

Hello Elizabeth,

I assume you are referring to the origination of a new loan. The reverse mortgage company must have a legal review done on the trust of any borrowers who wish to take title in the name of a trust to determine that there are no provisions in the trust that would violate HUD parameters. 

It doesn’t happen too often but there are times when clauses are inserted in the trust that would limit the beneficiary’s (borrower) right to borrower or continue to live in a property, etc.  The legal review must include the entire document to determine that the trust does not contain any provisions that would make taking title in the name of the trust unacceptable to HUD. 

If you do not wish to supply the entire trust, you do have the option of taking title as an individual if you still wish to get a reverse mortgage and not in the name of a trust but even if you want to move the title into the trust later, the same trust review would be conducted at that time.

Hello Susan,

I cannot really say what is holding things up because that does not sound like a typical payoff transaction to me.  On a normal payoff, the title company would forward all the documentation to show that you have the right to settle the loan to the lender along with a request for Beneficiary’s Demand for payment in full. 

Once the Demand statement was received, the title company would pay the loan off in accordance with the Beneficiary’s Demand (Payoff Figures) and then any excess funds would stay with title to be disbursed to the seller.  I do not know why the title company would send excess funds to the lender above and beyond the amount stated on that demand that would require that you wait for the lender to turn around and return excess funds. 

Lenders are governed by laws which determine how long they must answer the request for a Beneficiary’s Demand and to issue a Reconveyance which shows the loan has been repaid.  The buyer and the buyer’s lender (if there are one) are presumably looking to get their recorded documents showing that they now hold clear title, and that the new lender’s lien is in first lien position. 

I think you should probably get a manager of the title company involved at this point because it should be completed.  If they are still having a problem with the lender, that could be an indicator of an even bigger issue that you should know of and should rectify immediately even it if requires legal assistance.

Hello Stephen,

I am sorry, but I honestly cannot give you a reasonable answer to your question.  I am not familiar with Canadian laws or mortgages and so I could not begin to comment on how they would look at your situation. 

I know that in the states, you can have the trust reviewed by a lender though (by the legal counsel the lender uses for trust review) and they can let you know if the trust meets HUD’s requirements so my suggestion would be to locate a Canadian lender that can review the trust for acceptability for you and let you know before you incur a bunch of expenses. 

If you were in the U.S. and asking the same question, I would still need to advise you that the trust would need to be reviewed to be able to determine if it would meet the requirements so this is the best I can offer.

Hello Robert,

The first thing I would have her do is write a letter to the lender now that allows you to speak to them and them to you on all matters relating to the loan.  This will just make things that much easier to work with them when you must. 

Work with your mom to have all the reverse mortgage documentation and her monthly statements in one location.  This way you will know how to contact the servicer and will have the balance at any given time. 

The property is in a trust so that is a benefit, but you should determine if there are any other successor beneficiaries on the trust.  If you are the sole successor beneficiary and the successor trustee of the trust, then you should have no problems with the passing of the title but I would just have a chat with the estate attorney and ask about any probate or other issues with the passing of the title. 

Don’t forget, you still have the loan to consider.  When mom is no longer living in the home as her primary residence, the loan will become due and payable.  You need to decide what you want to do with the house. 

Do you plan to keep it or sell it?  If you are going to keep it, the loan will need to be repaid with funds you have available to you or by refinancing the loan with a new loan in your name (another reason title is so important because you cannot get a loan if that is your plan until title is in your name or the trust is acceptable to a lender). 

The trust may become irrevocable after mom’s passing and if so, may not be eligible for many new loans and that would mean you would need to take the property out of the trust to get new financing and you need to know what that will take.  Questions for the state attorney. 

If you plan to sell the home, the trust (revocable/irrevocable) would not be as important, but you still need to have a transferrable title and you also need to be sure there are no probate issues.  Remember that the loan allows you to pay the loan off after mom passes at the lower of the amount owed or 95% of the current market value. 

Another good reason to keep the statements handy so you can compare the balance owed on the loan to the sales prices of similar homes in the area to determine the approximate equity in the property. 

That might also help you to make any decisions you need to make in advance.

Hello TJ,

This is a question for a real estate attorney and in all honesty, I do not know how this will turn out.  You will have a title company on the hook for the errors in title and the lien recording so the lender will be covered but most states allow for the protection of lenders who make loans in good faith but then later have issues like this. 

Your parents did borrow the money and the lender did give them the funds, but I honestly cannot say what the court would do if they determined that the ownership of the property was not theirs against which to borrow.  The terms of the trust may come into question. 

Did mom and dad change the title so that the son and daughter were the sole beneficiaries of the trust or successor beneficiaries?  A lot of questions and there is just no telling what the court would determine, and this would certainly wind up in court if you believe the lien should be contested. 

I wish I could give you a more definitive answer, but you really do need the advice of legal counsel and even then, unless he can absolutely tell you that the lender does have a valid lien, it will probably not end until you complete a court case.

Hello Dick,

The trust would have to meet HUD requirements but if she is the beneficiary and qualifies for the loan, the trustee is also willing to allow the loan and the property meets HUD’s standards, the loan can be closed.  How much money would be available though would be another thing. 

The amount available is dependent on the age of the youngest borrower on the loan or in this case, the beneficiary.  If she is 62, the maximum she would have for loan benefit is about 52.4% and then all costs would also be subtracted from the funds available.  Also, if you are not using all the money to pay off liens or mortgages against the property, HUD will limit you to 60% of the available funds at closing or in the first 12 months.

If I am following you correctly, her home is valued at approximately $185,000 ($150,000 equity plus $35,000 that is encumbered).  That means that the reverse mortgage available to her would be approximately $96,940 (again, at 62 years of age) and then just a little under $60,000 of that money would be available to her in the first 12 months.  $35,000 would be needed to pay off the existing mortgage and she would need some of it to pay any costs of the loan. 

The remaining funds would be available to her after 12 months.  If she is older than 62, this amount would also be higher.  But even if she is older, I am afraid there will not be a lump sum of $100,000 available to her at closing followed by a line of credit after that on a $185,000 home. 

The loan is set up so that she would not need to make a mortgage payment for the rest of her life so they cannot give her a large percentage of the value of the home in proceeds as well or the loan plus the interest accrual would represent a very large loss to HUD in every instance. 

The best bet would be for her to visit our online calculator to see what she might expect to receive for her circumstances and see if that works for her. 

Hello Rich,

Your brother is not required to revoke any trust to get a reverse mortgage.  I think you may be getting bad or misinformation. 

If a borrower wishes to take title in the name of a trust rather than as an individual, HUD allows this practice, but the trust must meet HUD requirements (which 99% do). 

If your brother’s trust does not for some reason, he still has options without revoking the trust.  He can usually file an amendment to the trust which in most cases will resolve the issue(s) that renders the trust unacceptable to HUD. 

If he is unable or unwilling to do that, he can remove the property from the trust and take title to the loan in the name of an individual which leaves the trust intact but removes the home as an asset of the trust. 

But as far as your last question is concerned, I would suggest that he have his attorney review the situation before deciding. 

I cannot advise on legal matters and do not know why the trust is not acceptable or why his attorney has written it as it is. 

If it is just a matter of a simple amendment to the trust that his attorney has no issues with, that would solve everything with the least amount of effort and cost. 

If his attorney is not familiar with HUD requirements (many attorneys who deal with trusts are not), he can contact one of the attorneys who review trusts for lenders to determine compliance and they can advise him. 

Your brother’s lender can probably give him the name of the firm they used for trust review. 

In the end, it is still up to your brother on advice of his attorney if he is willing to make any necessary amendments but if not, he would not be able to take title in the name of an unapproved trust for an FHA (HUD) approved loan. 

Hello Stephanie,

I am afraid I cannot give you the advice you seek. 

I can tell you anything you need to know about the reverse mortgage, but it sounds like you have a pretty good handle on your options there. 

You need to pay the loan off and that can be with cash you have available to you, with another loan, or by selling the home and using the sale proceeds. 

Which one of those options is best for you depends on several things that I cannot begin to determine...

There may be tax implications that I cannot consider, the trust could be adversely affected by some actions and not others and you really need to protect your rights and inheritance. 

I would strongly suggest that you consult with an estate attorney to determine what options you have and how it may affect you both now and in the future. 

The money you spend will be well worth it, especially if he/she prevents you from doing something that inadvertently would have created a large tax liability. 

Hello Maria,

The loan has nothing to do with your title. 

A reverse mortgage allows your husband to add you to title at any time but remember that does not prevent the lender from calling the loan due and payable if something should happen and your husband is no longer living in the home as his primary residence. 

The only way to do that would be to refinance the loan in both your names (if you are 62 now) or with you as an eligible non-borrowing spouse (if your comment about age means you are 59 now, not 3 years ago when you married). 

Either way, you would be able to remain in the home after your husband passed or moved to assisted living if needed on the terms of the existing reverse mortgage but you cannot do that now.

About the title, it would take a Deed of some sort to convey title from your husband to your husband and yourself. 

When you did the trust and put the property into the trust, that also required a Deed from your Husband to the trust. 

It sounds like she is telling you that when your husband placed the property title into the name of the trust, you as a co-beneficiary of the trust are also now a co-owner of the property with that one Deed but if you have questions on that specifically, I would suggest that you confirm this with the attorney who prepared and recorded the trust and who also would have probably been the one who moved the property vesting (ownership) into the trust from your husband as an individual.  I cannot begin to assure you one way or the other without having seen any of the documents or title.

The family still owns the home.  You need to speak to the successor beneficiaries of the trust (presumably your mom and uncles) to see if they will sell you the home. 

The loan is now due and payable and if they are unable or unwilling to repay the obligation, they may just be willing to sell or give the property to you. 

Then you still need to consider that the loan will require repayment so you need to know what you plan to do for funding if you don’t have the cash available to pay off the loan that is due. 

Most likely a new loan but you should check into the financing to see if they would rather do the new loan as a purchase from your relatives with a down payment and verified terms or a refinance after you receive title.

Hello Rita,

I really cannot tell you what is happening with this transaction based on the information given. 

Your grandfather cannot be the non-borrowing spouse of his daughter and unless the daughter is also 62 or over, she could not even be on the loan but that may be a moot point in the process. 

It is more likely that if there was a loan completed that she orchestrated for just him that it was done with her as the Power of Attorney if she has that ability.  She cannot do the loan on his property in his name even if she is the trustee of their trust. 

The refinance would have paid off the underlying loan so that there was just one reverse mortgage on the property, there cannot be two reverse mortgage loans. 

I can confirm that if they did a refinance, the refinance transaction did pay off the initial reverse mortgage and that first loan is gone now. 

I am not entirely sure though that you have all the information correct. 

When you get a reverse mortgage loan, the Deed of Trust is recorded for 150% of the value of the home or the maximum HUD lending limit, whichever is less. 

Is it possible that you are talking about the same loan and you are just looking at the recorded amount and thinking there are two loans because it is higher than the Principal Limit or loan amount you know the loan to be? 

Deeds and Deed of Trusts are recorded documents and I would suggest that you check title and see if there really are two recorded reverse mortgage loans (one that would now be paid in full and a second one that was used to refinance it). 

The only way you would know what amounts were available on a new loan if there was one and what was used to pay off the first loan would be to get the closing statements from the refinance transactions as well as the sale of the property if that loan was also closed now. 

Hello Scott,

If the trust meets HUD requirements, you would be able to get the loan and your daughter in law would not be involved. 

However, since the trust is irrevocable, if the trust does not meet HUD requirements as is, you may not be able to amend any changes required if it does not meet HUD requirements as is. 

The only way to know would be to have it reviewed.

Hello Nicholas,

It is important that once you have the Trust prepared, BEFORE you change the title, you send the trust in to the address on the servicing notices for review. 

You do not need to send the original, just a copy with the instructions that you intend to change the title to your trust and request affirmation that the Trust meets HUD requirements and that it is OK to do so. 

If the Trust meets HUD requirements, there will be no problems and you will be notified that you can now change your title to your approved Trust. 

If you change the title without Trust review and the Trust does not meet the HUD requirements, you run the risk of having your loan called due and payable so it is important that you go through the step to review before you make any changes to the title.

Hello Clara,

You have the role of the reverse mortgage lender confused. 

The lender does not decide who will receive the house after the death of the original owners. 

And the only time this is a “sale” is if someone is buying the property from the heir who inherited the home or buying out the interest of another heir or the estate. 

The lender has a lien on the property to secure the reverse mortgage loan and that is it. 

When the owners pass, their estate owns the property (still subject to the lien) and the property passes to the new owner from the estate in accordance with the owners’ wishes if they have set up a trust, will etc. or based on the direction of the probate court. 

But in any case, the lender does not determine who will own the home or approve who that will be or to whom they sell the home. 

The heirs and possibly the courts would determine who will receive the home because of the passing of the borrower (assuming there is an heir).

The only time the lender has any say in it at all would be if no one stepped in to repay the obligation and the lender was forced to foreclose and became the legal owner as a result of a Trustee’s Sale.   

This could happen either because there are no heirs, or none wanted the home and they took no steps to repay the loan that is now due and payable. 

I would encourage you and any other heirs to determine the disposition of the property quickly so that the individual(s) receiving the property have plenty of time to arrange for their financing or whatever they need to repay the loan that is coming due if you intend to keep it. 

There are extra steps for incapacitated borrowers and trusts but as long as they occupy the property and they are the beneficiaries of the trust, as long as the trust meets the HUD requirements and you are willing to sign the necessary documents as the Trustee, yes it is possible to obtain a reverse mortgage.

If the Beneficiary of the trust is eligible for the loan and lives in the property, the loan can be closed with the Trustees also signing the legal documents. 

The Trustee(s) do not need to be old enough to be eligible for the loan nor do they need to live in the property, but the Beneficiary would need to be eligible and live in the home.

Hi Georgie,

Yes, you can, but I would recommend that you contact your attorney to determine what would be the most beneficial for your circumstances. 

You could not also be a co-beneficiary of the trust at the time the loan was closed and so you would be left with a decision that you would need to discuss with your attorney. 

You could change the title to you and your husband as individuals at the time of the loan and you would be considered a non-borrowing spouse on the loan. 

This would allow you to remain on title and to live in the home for life even if your husband were to pass or need to leave the home for any reason before you (you would still have to adhere the terms of the loan such as paying all property charges on time and live in the home as your primary residence). 

BUT as a non-borrowing spouse, if anything ever happened and your husband was no longer living in the home, you would not have access to any funds still available on the loan. 

You could also submit the trust to the servicer and request that the property title be approved to put back into the trust after the loan closed and more likely than not, that request would be approved but again, if your trust did not meet HUD requirements for any reason, approval could be withheld. 

For this reason, you really need to speak with your attorney and discuss the ramifications of what would happen if the approval was not granted on the transfer back to the trust. 

Your attorney can give you the upside and risks of what such a move might bring so that you can make an educated decision as to whether it is an acceptable course for you to take. 

That is a question only you folks with careful consideration and the guidance of your legal counsel can determine.

Hello Peter,

Some properties that are in irrevocable trusts still meet the HUD guidelines.  The only way to know for sure is to have the trust reviewed for compliance.

Hello Ed,

When the borrower is no longer living in the home, the reverse mortgage becomes due and payable.  The lender has no rights to just go in and kick anyone out of any home. 

They would only be able to remove any occupants after a foreclosure action and they owned the home.  The lender also does not determine at what amount and heirs sell the home.  The lender does have a lien on the property though. 

If you try to sell the home for less than what is owed to the lender, the lender does not have to agree to allow the sale to go through and can choose to foreclose instead.  If you sell the home for an amount over the amount owed, there would be no issues with your sale – as far as the lender is concerned. 

I cannot comment on heirship laws or what might happen if any of the heirs of the owner were to contest the transaction.  Just remember though that even if there is still equity in the property, the lender will not wait forever for the sale to be completed. 

If you do not make positive moves toward either refinancing the loan or selling the property and repaying the obligation, sooner or later the lender will initiate a foreclosure action and if that goes all the way to completion (usually 5 to 6 months from the day it is started), then you could be removed from the property as a result of the sale if you were still living in the property at that time.

Hello Dia,

Title can remain in the name of the trust because your father was the Trustee and the beneficiary of the trust.  The trust had to be reviewed at the time to be sure it gave your father the right to encumber (take out loans) in the name of the trust. 

The reverse mortgage allows this for the life of the original beneficiary or beneficiaries in the case of married or joint owners who are both eligible under the reverse mortgage program parameters.  It does not cover all subsequent successor trustees, however.  The loan is not and never was intended to be a multi-generational loan. 

If you wish to keep the home, you can do so by refinancing the home with a new loan at this time.  That loan could be a standard or forward loan, or it could even be another reverse mortgage if you qualify under the program requirements.  However, the loan does not stay active after the last original borrower or trustee on the loan permanently leaves the property. 

The fact that it may or may not still be revocable has no bearing at this time regarding it being due and payable.  When dad passed, if there were no other original borrowers left living in the home, the loan became due and payable at that time under the terms of the Note and Deed of Trust.

Hello Marion,

You would need to visit a local estate attorney and tell them what you want and have the will and possibly trust drawn up.  I don’t know what state you live in but some states are much more concerned with heirship laws than others and the estate attorney will be able to tell you what you need to do and what rights any heirs also have according to state laws. 

Hello Bob,

I cannot give you legal advice so to get advice on any possible liability, you would need to consult an attorney.  However, I can answer the question about the loan to the brother in law in the name of the trust with you as the trustee.  It is legal to get a reverse mortgage in the name of a trust and it does not matter that you are the Trustee.  Just know that if you choose to do this, as the trustee you will also be involved in the origination of the loan and will be signing loan documents. 

The loan has no recourse other than the property but again, you need to speak with your attorney to determine all possible issues and responsibility you accept as the trustee.  The borrower must be living in the property and must be the beneficiary of the trust.  If there is more than one beneficiary of the trust, all beneficiary’s must be eligible for the reverse mortgage and must all occupy the property.   

Hello Elena,

I am afraid I cannot answer that because it depends on the terms of the trust and whether you’re trust allows that.  You must have the trust reviewed by an attorney to tell you that.  I do have a question for you though.  Is there some reason you want to take it out of the trust first?  HUD does allow properties to be in a trust if the trust meets their requirements and nothing you have said so far would lead me to believe it would not be approved. 

You can have the trust reviewed by your lender and we could tell you quickly whether the trust meets HUD’s requirements.  Even then, if a revision is required, that can usually be done with a short amendment to the trust to change whatever provision in the trust violates HUD’s rules, but this is not typically even required as most trusts are approved as written these days.  Unless there is another reason you want to take the home out of the trust, I would advise leaving it in and just having the trust reviewed by the lender for acceptance.

Hello Bonnie,

The house is in foreclosure because the loan is now due and payable.  The heirs have the option of paying off the loan (either by refinancing the loan or with other funds available to them) or selling the property if they do not want the lender to foreclose on the property. 

If 4 of the 5 children want nothing to do with the home and it is going to be foreclosed by the lender anyway if they do not, I would suggest that you approach the family about transferring everyone’s interest to you before the foreclosure so you can obtain the necessary financing to keep the home. 

I cannot advise of any possible ramifications for taking the property out of the trust and distributing to just one of the 5 heirs and would strongly recommend that you speak to your attorney and/or financial advisor, but if none of the other heirs want the home and if it makes sense, why not at least talk to your family and tax attorney?  You may find that there is some reason it is not feasible, and you may find that there is no downside to doing it but you never know until you ask.

Hi Nancy,

You must decide what you want to happen with the home and then take the necessary steps to achieve your goal.  You can pay off the loan by refinancing the loan and continue to live in the house if that is your desire.  The loan can be repaid for the outstanding balance of the mortgage or 95% of the current property value, whichever is less.  If you decide you do not want to remain in the home, you can always sell the property as well.

The first thing you need to do once you know what you plan to do with the home is to perfect your title.  You may or may not need to go through a probate and so I would suggest you contact the attorney who prepared the trust and who placed the title of the home into that trust.  The attorney can best guide you through the steps needed to complete everything so that your property title does pass to you without a hitch.  You need the title to be in your name in order to finance or sell the home, so it’s not wasted effort.  This is assuming you want to keep or sell the property.  Your third option is to walk away and owe nothing and let the lender deal with the property and if this is your decision, you do not have to worry about perfecting your title.

As stated, the third option you would have would be if you check the value of the home and compare it to the amount owed and decide that you do not want to hassle with the disposition of the home and would rather let the lender take the home back.  There is no recourse to you and if you do not want to repay the existing loan or if values have not increased, if you are unable or unwilling to obtain new financing for 95% of the current value and you do not feel as though keeping the property is in your best interest, you can simply choose to allow the lender to take the property and owe nothing.  I do not recommend this though unless there is absolutely nothing to be gained by retaining or selling the home.

I have outlined the steps you should take here.

Hi Richard,

You are correct, the loan becomes due and payable as soon as you are no longer living in the home.  How long it takes the lender to call the Note due and payable is another thing.  Lenders find out about the passing of borrowers in several different ways.  If the lender is alerted immediately and the heir is diligently working on selling the property, the HUD has outlined a 6-month period with 2 possible 90-day extensions for most markets to sell a property.  When the sales were sluggish and it was taking 18 months to sell a home, HUD extended this allowance but that is not necessary at this time. 

But having said this I do give you this cautionary warning.  HUD approved lenders know that even if they started the process to foreclose immediately, by the time they obtain the appraisal they need, file all paperwork and start the process, the entire foreclosure would take close to 6 months in the shortest of instances with all steps required by HUD and by law. 

So, if your friend is diligent about marketing the property for a reasonable price and all signs point to the fact that the heir is working toward the repaying of the loan, he should have more than enough time to complete the sale.  However, if nothing is happening or the asking price is well above the current market and the lender feels that there is no reasonable expectation of a sale any time soon, sooner or later they will make the decision to begin the foreclosure.  This might be especially true if they determine that you had passed 9 months earlier and they had not been informed and there was no progress toward a sale. 

I know that the last thing families and friends want to do is to jump in to a loved ones’ home and start cleaning it out for a sale, but just like other unpleasant chores or bad news, delay doesn’t make it any better.  Have a conversation with your friend and make sure he and your family (if any) know your wishes in advance.  Have him talk to senior real estate specialists in the area. 

Very often, they can help him work with estate sale folks if that is something with which he must deal in order to get the home ready for sale.  The professionals who handle these sales day in and day out are wonderful and can make a daunting task so much more bearable.  I honestly believe that most people just dread the thought of doing what needs to be done to market the house and putting it off can put them in a bad spot if it shortens the time, they have available to complete the task.  A little communication in advance helps immensely. 

Hi Carol,

Yes, it can if the trust meets HUD requirements.  You should send a copy of the trust to your servicer along with the instrument you intend to use to put the title into the name of the trust but do not make any changes to the title until after you receive their approval. 

They will review the trust and give you approval if everything meets HUD standards (and most trusts do but some don’t, and some require some slight addendum).  Once the servicer has given you the approval, then you can make the title change through your attorney or title company and all will be good. 

As with any title change, I always suggest that borrowers utilize a professional’s help such as a knowledgeable attorney or title company so that you do not accidentally incur any taxation issues by not using the correct forms, etc. to be sure it is a tax-exempt transfer.

I am sorry, I could not begin to weigh in on this with the information available.  Different states have different laws and we do not give legal advice in any event.  I would suggest you check with the attorneys who set the trust up though.  Many times, they keep a signed copy and sometimes are trusted to keep an original signed copy.  At any rate, that would be the first place to start.  If they do not have a signed copy or original, they certainly would be able to advise you of the laws in your state about the need to probate the property based on your circumstances.

Hello Amye,

I am afraid this is one you will need to run past an attorney in the state.  This is not a reverse mortgage question but rather a legal question regarding the title, heirship rights and lien standing.  If mom owned the home and borrowed against it and the bank lent money in good faith, I don’t personally see how the lien would be deemed invalid if she was also during doing other title maneuvers that the bank may not have been aware of.  But then again, that is not a call I have to make and would suggest you check with a licensed attorney to see what you should do at this point.

Hello Sean,

I can’t answer the questions you are asking because they deal with the title to the property and not the loan.  Let me ask you a few questions.  Did they ever put her back on title?  Is the property in a trust or in their names as individuals?  We recommend that anyone contemplating this action before HUD changed the rules in 2014 consider it very carefully as it often seems like a great idea at the time, but not always so good later down the road when things like this happen. 

But when borrowers decided to go forward with this plan of action, we always recommended that they add the spouse back to title immediately after the loan closed.  The documents allowed for it and it is always easier to do it while all parties are still alive and before any illness than later.  I can only hope your in-laws received the same counsel and that your mother-in-law is back on title now.

If she is, they can remain in the home if the husband still lives in the property.  Once he leaves the property as his permanent residence (i.e. moves to assisted living or passes), then the loan would become due and payable and you would be looking for a vehicle to refinance the existing loan if you want to keep the property. 

If she is not on the title to the home at this time, I would suggest you contact an attorney in the area to see about taking whatever steps can be taken to add her to title at this time, if that is possible.  If the original borrower remains on title, there is no problem adding the spouse to title as well.  You just can’t remove him from title completely or the loan will become due and payable.

I would ask the attorney about possibly establishing a trust with mother and father-in-law as trustees to put the title to the property into because I can’t advise you on such matters.  It may require a court appointed conservatorship at this point given his state but again, it is easier to do things now rather than later especially if you wait until you have a loan that is due and payable. 

What I can advise is always remembering to have the trust approved by the lender to be sure that it meets HUD requirements BEFORE you allow them to transfer the title to the property.  Most trusts do meet HUD requirements but the last thing you want to do is find out after you transfer the title that this one does not, and you just triggered a due on sale clause. 

Once the title has been changed in accordance with lender/HUD and your family’s requirements and needs, it will make it fine for mom to remain there with the reverse mortgage in place as long as dad is still in the home as well and then it will allow her to do whatever she needs to do with the title as the remaining trustee after dad no longer occupies the home and you all need to make other provisions. 

And maybe the attorney will advise against the trust route and go in a different direction altogether but whichever way you all choose to go, my recommendation is to do it sooner rather than later.

Hello Sarah,

The reverse mortgage does not dictate to whom you may leave your home.  If you wish to make her the individual who will inherit the property when you pass, that is entirely up to you.  The bigger issue here though is that the loan will become due and payable at that time.  She will own the home, but she will have to determine if she wants to remain living in the property or if she wants to sell the home. 

Either way, the loan must be repaid at that time so if she wants to remain living in the property, she would have to pay the loan off with funds available to her or refinance the loan with a new loan (traditional forward loan or a reverse mortgage of her own at that time).  If she sells the property, then the proceeds would pay off the balance of the loan and any remaining funds would be hers.

The only way to avoid this eventuality would be for her to also be on the loan and on title when you close the reverse mortgage.  If she is also 62 years of age or older, there does not have to be a relationship of any sort as you describe, she just must be on title and living in the property to also be on the loan.  That would allow her to live in the home for life as well should something happen to you that would cause you to leave the home as your permanent residence (death or move to assisted living, etc.). 

Hi Lori,

I am afraid I don’t quite understand.  Your mom was abducted?  That would mean she had been taken somewhere by force so is she in the home or not?  Also, if she signed a Quit Claim Deed, to whom did she Deed the title?  You say, “she owned the house” (past tense), who owns the house now?  I’m sorry, there is just too much I cannot determine. 

Your mom or her trust must be the owner of the house now, she must meet the eligibility criteria for age, income and credit and she must live in the property as her primary residence.  If it is owned by her trust, that would have to go through legal review and the trust would have to meet HUD requirements.  If it does not, those issues can usually be rectified but I honestly don’t know what we are looking at.

Hello Bonita,

HUD does allow family or individual trusts, but not business trusts.  All trusts must go through a legal review and must meet HUD requirements or the loan would not be eligible und the HECM program. 

Hello Cee Jae,

This is something you really should discuss with your trust attorney.  The trust typically allows borrower’s families to move faster when it comes time to make any final arrangements for the sale of the property after the borrower passes because the trust does not die, the trustee is transferred to a successor trustee and the trust continues.

The loan still becomes due and payable though so the borrower’s heirs still need to determine what they will do to satisfy the loan at the time by either paying off the loan with other funds available, refinancing the loan with a new loan, or selling the property and that does not change whether the title is in the name of the trust or the individual.  The trust may make it easier to proceed though and is worth discussing with your attorney.

Hello Dave,

All Trusts go through a legal review, whether they are revocable or irrevocable.  The only way to determine that they are no disqualifying terms in the trust are to have them reviewed by an attorney for compliance.

Hello Cathy,

This is a question for your family financial advisor.  The act of putting a property in a trust is one to consider based on your family’s goals and does not affect the reverse mortgage.  There is no benefit or harm to the loan to have the property in your trust but there may be other considerations that you should discuss with your family and your attorney.  The loan still becomes due and payable when the borrower passes or permanently leaves the home so it does not affect that provision of the loan.  It may however make it easier on the families if the owner already has all their wishes drawn out and the fact that since the title is in the name of the trust and the trust itself does not die, the heirs can move more swiftly when needed.  However, those are all conversations to have with your trust attorney.

Hi Linda,

I would first ask you if you are at a time when this is now an issue or are you asking for future reference?  The reason I ask is because unless the terms of the trust were totally out of HUD’s acceptable parameters (and most are not), there is no reason they should have had to take the home out of the trust.  It is possible that there are terms that would preclude the trust from being acceptable but if your parents have not passed yet, I would suggest that you have the trust reviewed again at this time by the servicing agent and if it meets HUD requirements, you can move the title back into the trust before it becomes an issue.

Having said that, there is a good possibility that if the borrowers have passed, the title cannot now be transferred to heirs without going through probate.  The mortgage company can only work with the borrower(s) while the borrowers are alive or an individual that the borrower(s) has/have granted power of attorney or the new property owner once the probate is completed after they have passed if the property is not owned by the trust and for good reason.

The lender cannot be responsible to determine who the new owner will be.  If the lender agreed to work with one relative claiming to be the sole heir and the property had not gone through the court probation and a new relative popped up right afterward claiming that he or she was the true heir, then the lender could be liable for making a false determination.  You don’t need to present a will to the lender, but the probate will mean that the case has gone through a court and the court has determined who the heirs actually are and that is the only way the lender can be sure they have no liability from others making the same claim later.

Hello Barbara,

No one can force you to take any mortgage to which you do not agree.  The lender will not complete a loan for you if you do not apply for and qualify the loan, then agree to the terms of the loan by signing the legal documents.  Now that is not legal advice, that is the information from a lender letting you know we and no other entity can force you to enter into a binding loan contract against your will. 

But now let’s talk about the other 900 pound gorilla in the room.  While no one can force you to take a loan that you do not wish to take, I cannot tell you what options are and are not available to you with regard to distribution of assets and what the executor has the right to do or not do if there is not sufficient money to make all payments.  I take it you are to receive a property and your sibling is to receive cash but if there is not sufficient cash, I don’t know if the executor then has the authority to sell the home in order to keep things equal between you and your sibling.

I strongly suggest that you contact an estate attorney to determine your rights, obligations and to help mediate a possible solution.  If there is not sufficient funds to make payments to all parties in accordance with the trust provisions, the attorney can tell you what alternatives you have and also what risks you might run if you don’t do certain things to liquidate trust assets.  We could not possibly advise you in this matter but maybe even the attorney who set up the trust in the first place can assist you with your questions.

Hello Aileen,

The reverse mortgage is just a loan on the home.  The loan against the property does not affect the rights or obligations of parties to the trust.  To determine those rights obligations, you really should have a trust attorney review the trust and advise your husband.  This might be particularly advisable as in some states, subsequent trustees may have duties and liability to other heirs. 

In some cases, the trust itself contains provisions for the trust to pay legal fees incurred by the trustee to administer the trust so you can check to see if this trust has such a provision.  If it is convenient, you may even want to use the same attorney(s) that drafted the trust, but that is entirely up to you.  In any event, these are all legal questions that an attorney needs to answer for you and not a lender.

Hi Bev,

That all depends on the trust itself, title company requirements, the state in which the property is located and your other qualifications.  Since the trust is irrevocable, the chances are that you cannot make changes or move assets into or out of the trust at this time and in a state like Texas, you probably would not be able to complete the loan based on the laws in the state.

In those states where the state laws do not present issues, the trust would still have to meet all of HUD’s requirements, as is without any possibility of changes due to the irrevocable nature of the trust, in order for you to receive the loan.  In addition to the trust needing to meet HUD’s requirements, you would also need to  meet HUD’s borrower parameters which include minimum age of 62, income and credit as established by the financial assessment guidelines and all property requirements.

If you meet HUD’s requirements (age, income, credit, etc), then you could have the trust reviewed to make that determination prior to moving forward.  At least that way you could save the expense of the appraisal if there was no possibility for approval.  Unfortunately, you would have to complete the counseling as there is a cost to have the trust go through a legal review and you could incur no costs until you had received your counseling certificate.

Hello Denise,

If the loan is to be in the name of the trust, then yes, you would have to supply the trust to be reviewed.  If the property is not in the trust and the loan is to be to individuals, not to the trust, then no, the trust would not have to be reviewed to verify that it meets all the proper requirements. 

Most trusts are written so that they conform to HUD guidelines but every once in a while, we find that the that a property with the title vested in a trust and the terms of the trust do not meet the requirements.  In other words, there are terms in the trust that are not acceptable for the loan.  Such an example would be if there are other beneficiaries of the trust that do not live in the property and do not meet HUD requirements for the program.  We have also seen some trusts that only give the borrower a life estate in the home for the life of another individual and that would not be acceptable.  For these reasons, every time a property is vested in the name of a trust, that trust must go through a legal review as that is the only way to determine that the terms of the trust are acceptable for the loan.

Hello Zayla,

I am afraid I really can’t help you a lot on this.  This issue doesn’t have anything to do with the reverse mortgage but really concerns property rights and trusts.  The answers will probably depend on what kind of a trust your grandfather established at the start.

If he established a trust whereby your father became the beneficiary of the trust (the owner of the home) upon his passing and you were a party named secondarily in case your father predeceased you, it could be that the property passed entirely to your father by virtue of his standing in the trust and your father may then have had full rights to change the trust once he is the beneficiary and the trustee.  It could have been a revocable or irrevocable trust but your father may or may not have the ability to rewrite the terms at this time.

If you know who your grandfather’s attorney was who originally helped him establish the trust, you may be able to contact him/her and ask for advice.  You may have to just contact another trust attorney to determine if there are any legal channels you can follow.  All I can tell you for sure is that this has nothing to do with the mortgage and unfortunately, we cannot advise you on legal matters.

Hi Lisa,

I can’t answer this for you, it is a legal question and one that might not have the same answer in all parts of the country I would wager.  For instance, states like Texas have very strong heirship laws and might have a different answer than a state that puts more emphasis on their marital status.  At any rate, this question deals with your and his legal rights, not the reverse mortgage itself.  I would suggest that you all discuss the issue before mom passes so that you can also discuss a solution.

I don’t know if your step-father is currently on title or not which may make a big difference on what can and cannot be done at this time.  Perhaps mom should consider a trust at this time if she is the sole owner as an attorney can set up the terms of the trust so that the parties’ rights are all completely spelled out upon her passing.  At any rate, this is definitely a question to ask of a qualified estate attorney in the area where the property is located.

Good Afternoon,

We hear this all too often.  Unfortunately, if the borrowers never supplied information of the trust to the lender which notifies the lender of their intent and gives consent to successor trustees, the lender is handcuffed by different laws as to what they can provide to heirs.  The last thing the lender wants to do is to get into the middle of a family feud for heirship rights and absent any written authorization from their borrowers, they will only provide what the law allows. 

There should be current statements on the account sent recently to the borrower’s address and you can sell the home.  You may need to supply all the documentation to the lender to verify that you now have the legal right to obtain all that is necessary to close the account but remember, without anything from a court that gives them protection from any other possible heirs, the servicer will not readily hand over information to you that they have not been previously authorized to give.

If you enter into a contract of sale and under the terms of the trust the legal representative of the trust has authorized the sale, the closing agent should have no problems obtaining the payoff statement at that time.

Hello Alma,

You do need to send the lender a copy of the trust for approval.  The loan documents allow the lender to call the Note due and payable in the case of a transfer of title and that’s exactly what you did.  However, if the trust can be approved, they will not and all will be fine.  If you cannot find your copy of the trust, contact the attorney you used to draw it up.

The problem is that the unauthorized transfer of the title to the trust will not “void” the trust in any way, but your title change, unless approved by the reverse mortgage lender, will violate the terms of the legal documents of the loan.  That is cause for the lender to call the loan due and payable which would lead to foreclosure if you were unable to pay off the balance.  

You really need to find the trust documents because I think they would be needed now even to remove the property from the trust.  Title companies need to be sure who has the right under the trust (the current owner of the property) to do the change in title in order to insure your title.  Without having the trust to review, it may be impossible to determine that you still have the authority to take the house back out of the trust and that you didn’t give up this right with the change of title.

This might also create problems for you without a copy of the trust since the title change has already been done.  I would strongly suggest that you contact a trust attorney to get a copy of the existing trust if at all possible and if so, send to the lender for approval.  The lender may require some addendum(s) to the trust but the attorney can handle that for you.

If you absolutely cannot find the attorney who created the original trust and cannot find the trust itself, perhaps the attorney can advise you on a new trust to replace the original and what would be needed to correct the title to the new trust?   I can’t advise you there, but I am sure the attorney would be able to do so and as long as you had it all sorted out before you send it to the lender, you should be fine.

Hello Arman,

You actually have a couple of issues that will prevent a lender from being able to do the loan in the trust as it is currently structured.  I am not aware of any lender who would be able to grant the reverse mortgage under the scenario you describe for a HUD Home Equity Conversion Mortgage or proprietary or private reverse mortgage.   

It would meet HUD requirements if the children were the trustees of the trust, but only if mom is the sole beneficiary of the trust.  Mom has to be the sole beneficiary when the loan is closed or the trust is not acceptable to HUD.  And since the trust is nonrevocable, I don’t believe you can make the changes to the trust at this time.

There may be a way to remove the property from the trust, that is take the house out of the trust and do the home with mom being a sole owner, but your attorney would have to tell you is this is possible or advisable.  Even if the assets of the trust are such that the home is only a small portion of the overall trust and this seems like a viable alternative, there may be other tax ramifications for doing this so you would want to be sure you had gotten adequate legal and tax advice before contemplating such a move.

Hi David,

I’m not really sure what you mean by “a house that’s in a will”.  If you are referring to a home that you acquired through a will or inheritance, absolutely.  As long as you now own the home and are occupying the home as your principal residence, you can use the home to obtain a reverse mortgage.  If you mean that the home is yours but you have it in your will to go to someone else upon your death, again, yes, you can use the home as your collateral for the loan and the heir would receive the home and the loan would be due and payable at that time you permanently leave the home.  If you mean that you don’t own the home but are able to stay in it as the result of a provision of someone’s will but the property is actually owned by another party, then no, you would not be eligible for the loan as you are not the owner of the property.  There are certain life estates that also meet HUD requirements and therefore allow borrowers to obtain reverse mortgages but for that, you would need to have the particular estate reviewed to determine whether or not it would be acceptable.

Hi Marcy,

Unfortunately, I can’t help you with this question.  This is a legal issue and the rights of all parties really don’t depend upon what type of loan is on the property.  As a side note, I do agree with you that it would be a real shame if your brother caused this to go into foreclosure by his actions and the family lost the equity as a result.  I would strongly suggest you contact an attorney to determine the best route to take.  I don’t know what would be your best course of action.  I don’t know if you can legally turn off or quit paying the utilities so that your brother has to make a move or if it is even advisable to do that so you really do need to speak with someone who can advise you of all legal options.

Hi Lillian,

You sure can.  Before you transfer the property into the trust, send a copy to your servicer for approval though.  Most of the trusts created do meet HUD requirements but every once in a while we run into one that does not contain the safeguards that are required and it’s a simple process to have it amended, but you would want to know this before you did any transfer of title.  You can easily record the Deed to move your property into the trust once the servicer has approved it and you don’t have to worry about running the risk of issues with your lender if the initial version of the trust does not contain the correct wording to avoid a due on sale provision or duplicate fees for extra recordings.

Hi Bonnie,

I cannot answer this because it is a legal question that may require a review of the laws of the state and the trust.  It would seem that a Quit Claim Deed would seem reasonable from all who had a possible interest who were not willing to participate with any steps necessary to protect their interest (whether that means pay money to retire the debt or monthly payments on a new loan, etc.), but I cannot say and I would strongly suggest that you contact competent legal counsel with this question.

Hello Larry,

She would not be able to get the loan under these circumstances.  As would be the case with any other FHA-Insured loan, the title would have to be clear to be able to be used as the security for the loan.  If there are others on title to the property and HUD had to enforce the terms of the loan, they would be unable to do so if others who did not agree to the terms of the loans were also on title.  Also, what would the lender or HUD do if the co-owners didn't pay their taxes or maintain "their half" of the home?  How would they enforce the terms on half the parcel?  Unfortunately they could not.

Hello Ellie,

These are questions you need to ask of a licensed attorney in the state in which the property is located.  It really doesn’t have anything to do with the loan or the terms of the loan but with the rights and obligations of heirs and parties to the trust and for that, you really do need to consult with a licensed attorney.

Hi Gayle,

The Trustee of the Trust is usually the one who administers the trust and this may or may not mean that you also are the sole beneficiary of the trust or the “owner” of the property now.  If you inherited the property, you live there as your primary residence and the property is in a revocable trust for which you are now the beneficiary and trustee, the chances are very good that you can now get a reverse mortgage on the home but you would have to have the trust reviewed first before anyone could tell you that for certain.

Hi Bill,

This is not a problem at all.  Have your attorney prepare the trust and submit to the servicer for approval before you change title.  Once the trust is approved, you can change the title with no worries.  You just don’t want to make the change until after approval just in case there is something in the trust that is not ok.

Hi Nora,

The presence or absence of a will does not affect your ability to get a reverse mortgage in most cases.  If you also have the title to your property in the name of a trust in conjunction with that will, the trust has to meet HUD guidelines but that is even still acceptable. 

Hi Gail,

This sounds odd but I certainly can’t make any judgements with the information given and without having been part of the transaction.  I would definitely suggest that you seek counsel with a qualified legal representative in the state in which the property is located.  I think it would be a wise investment just to know what all the documents actually stated, what the title is now, if it changed during the course of the loan and whether or not everything was handled appropriately.  If there were any mistakes made, he would be able to advise you on possible remedies.

Hi Randy,

You’re caught between the desire to protect your sister’s ability to live in the home and your desire to transfer title to your daughter upon your death.  You can do one or the other, but to do both I think you would need to engage the help of an attorney to set something up (trust, etc) so that the title reverts to your daughter upon the death of both you and your sister, not just you.  Let’s go through how the reverse mortgage would have to be structured in order to protect both you and your sister and then the question is how do you get title to your daughter after that.

You and your sister would both have to be on title at the time the loan was taken out and then you would both be covered for life as long as one or the other of you was still living in the home.  As soon as neither of you was on title or living in the home, the loan would become due and payable at that time.  If the title went to your daughter upon your death, then the loan would become due and payable as a result of neither of you retaining title any longer.  In other words, even if your sister was still living in the home, if she was no longer on title after your passing the loan would be due and payable.

One or the other of you has to still be living in the home and be on title for the loan to remain active.  I am not an attorney and I cannot advise you on legal matters, but it seems to me that an attorney may be able to achieve your goals with a family trust though.  I would suggest that you speak with an attorney about setting up a trust that places the property into an FHA eligible trust whereby your daughter is the only individual who stands to ultimately own the assets of the trust after both you and your sister pass.  The attorney can tell you if this is possible and if there are any negative aspects to such an action of which I am not aware.  Again, I am not an attorney and I am not familiar with all the heirship laws in Texas but this is certainly where I would start and see if this would achieve your desired goals.

Hi Yolanda,

I don’t see a question here but it sounds like you are questioning their rights to act on your mom’s behalf.  A title search would indicate the manner in which title was held and are you saying that the lender did not know the title was in the name of the trust and the loan was done to your mother as an individual?  Because I don’t know how you came to the conclusion that there was no title search completed.  If your mom’s house was in the name of her trust but she had authorized your siblings to act on her behalf, the fact that the property was in a trust would not prevent them from doing any loan.  Also, the fact that your mother had dementia which was diagnosed prior to the loan would not necessarily have prevented her from obtaining a reverse mortgage as long as there was a person who had a properly executed Power of Attorney or the court ordered a conservatorship that allowed for the reverse mortgage even after that. 

HUD’s rules for the ability to obtain a reverse mortgage for an individual who lacks competency (such as an individual with dementia) are very explicit.  If your mother had already entrusted them with a Power of Attorney which predated the onset of her illness, they had the legal right to encumber the home with a mortgage, reverse or otherwise.  Your mother gave them that authority by granting them power of attorney.  And it sounds like they may have been on her bank accounts as well or they would not have had the opportunity to take funds from them. 

Have you talked to your siblings about this matter?  I think I would start there to see what the money went toward – the loan may have been used to pay off an existing mortgage so that mom could stay in the home without having to make another mortgage payment.  It may have gone to living expenses or who knows what but they may surprise you and have records of money spent.  If you feel that they are not doing things in your mom’s best interest, then you may want to seek the counsel of an attorney.  You just have to realize that if mom had the foresight to establish a trust, she may have put the other steps in place that allowed your siblings to get the reverse mortgage with no shady actions whatsoever.  Maybe you can even contact mom’s attorney.  He or she may be able to give you some insight into your mother’s written instructions and who has the ability to act in what capacities for your mom as well.

Hello Nat,

You can move a property encumbered by a reverse mortgage into an approved trust.  However, since the trust has to meet HUD parameters, you should have the trust created and send it to the servicing lender for review and approval before you change the title to the property.  Most trusts created today are acceptable but if the attorney who created the trust included any language that would make the trust unacceptable, or if the trust changes the title so that the original borrowers are not the trustees and therefore someone else became the trustee (owner) of the trust and property, the loan could be called due and payable.  This is why you would want the trust approved before you changed the title to avoid this mistake.

Good Afternoon,

We do sometimes run across issues such as this and there really is no way to complete the mortgage on this property based on the fact that you can’t place the loan on half of the house.  The property title has to be clear for the borrower to obtain a loan, they can’t get the loan on half of the property.  If she can sell the home or her interest she could use her proceeds to purchase another home using the reverse mortgage on the property she buys in just her name if that would work.

Hi Mark,

The lender has already done their own appraisal and if the home is valued at $700,000 on their appraisal as well and they see that the current trustee is refusing to sell for less than $900,000, they will not grant any extensions before it goes to foreclosure.  The lender is best served by allowing the heirs to sell the home and pay the loan off, thereby not have to go through the foreclosure process.  However, once it becomes apparent that the heirs are not making a good faith effort to sell the home or are completely unreasonable about the value expectations, they will begin the foreclosure process as the foreclosure itself takes a while and they won’t wait forever to begin.  If that happens, the trustee may get more reasonable about the asking price or you may have another opportunity to purchase at the foreclosure sale by bidding since the lender can only start the bidding at what is owed is owed on the loan (plus foreclosure costs) and then any other bidders bid from there but the lender cannot bid again higher.

Hi Charles,

If the loan was also in the name of the trust, I don’t know why this should be such as issue.  Have you gone higher at the servicing company to request assistance?  If so and you have gotten no help, you may have to request an attorney get involved to settle the matter.  This seems extremely odd though, especially if the loan was in the trust anyway but you may need to go over the head of the person who is planting their feet so firmly and go up the ladder a few rungs.

Hi Secrette,

Reverse mortgages can be made only to individuals and their qualifying trusts.  The loan is based on the age of the youngest borrower with consideration of the property value and interest rates.  Churches, corporations, partnerships, etc. are not living beings with life expectancies that can be quantified and therefore risks and payback models determined.  HUD would have no way to set the amount available as there could be no expectation of an end date.

Hi Sherry,

There is no problem adding your name to title now and it’s actually a good idea.  Not only do the loan documents not prohibit it, there is specific language that allow it.  As long as your husband’s name remains on title, he can add you with no repercussions to the loan at all (but remember to have the trust approved with the servicer). 

The reason this is actually a good idea is so that if anything happens to your husband, you need to make a decision if you want to sell the property, obtain financing in your name and keep it or just walk away from it with no further obligations.  If you choose the latter, being on title is not important.  The reverse mortgage is a non-recourse loan and if you choose to let the lender take the home and not pay off the loan or sell the house after your husband passes for any reason, the lender cannot seek repayment from you in any other form regardless of whether you are on the title or not.  However, if you do want to sell the property to retain any equity or if you do want to obtain any financing at that time and keep the home, you would not be able to do so until you were on title to the property.  If you wait until after your husband passes to do this, there could be delays with probate, etc. at that time that interfere with your plans.   If you are already on title, you can make your decision immediately and then act at your speed, not some court with a time constraint.

Hi Kendall,

As long as the reverse mortgage borrower who was the Trustee at the time of the original loan is still living in the home and will be the one whose name the property is transferred to, this would not be a problem as long as the trust allows it.  If you are talking about a loan that has not closed yet, the owner can certainly also take the home out of the trust and place it into their own name, also provided the trust allows this pursuant to the terms of the trust. 

But I would suggest you have the attorney who prepared the trust make the change and not a third party such as a lender or title company/escrow company make the change.  They may be able to physically prepare the Deed to change the title, but there may be other implications that need to be considered.  If the change of title is not done correctly, there could be tax consequences, there could be a provision in the trust itself of which the lender/title is not aware or other issues that would make the attorney a much better option.  Two examples come immediately to mind and am I sure there may be others.  One was a borrower who had her title changed and the change was not prepared so that it did not trigger reassessment of the property.  She went from a very low tax base to a much great cost and at last report, the taxation authority was not backing down.  Another example was a borrower who took a property out of a trust and when he did it, it triggered some provision in the trust for a sale and division of property with family members who did not have a good relationship.  I don’t know if you have any issues like this with your circumstances or not but I truly believe it is worth the cost to have it handled correctly the first time!

Hi Linda,

It seems to me that this question can be asked one of two ways and there could possibly be a different answer.  Can the trust purchase a home for you?  I can’t answer that.  That would depend on your trust and how it is established and the terms.  You should seek the advice of competent legal counsel on that issue.

The second possible way this question could be asked is can you purchase a home in the name of a trust.  The answer to that question is yes, as long as the trust meets HUD requirements.  Again though, I am not familiar with all the terms and I would caution that you would want to be sure that the reverse mortgage would allow you to remain in the same property as the costs to move multiple times would be prohibitive if the loan did not achieve that goal.  With regard to the costs of the property, we have had income and expenses met by trusts in the past that were acceptable, again though, it would depend on the terms of your particular trust.

Hello Michelle,

The existing loan will be called due and payable when you are no longer living in the home as your primary residence under the terms of the loan.  The benefits are determined based on the age of the younger spouse and so, any time borrowers married to younger spouses after the date the loan was closed, the benefits would not be accurately determined if that younger spouse were allowed to be placed on the loan  and given the same option to stay in the home for life without making a payment.  The program is not designed to allow for the addition of others after the close as that would completely throw off all assumptions and there would be no way to compute borrower benefits. 

You can place the home in an approved trust as long as the trust meets HUD’s requirements and most do since the requirements are geared toward borrower protection in most instances (have the trust reviewed by the lender before you change the title to be sure it meets all of HUD’s requirements).  You can also add anyone to title at any time as long as you remain on title (if you transfer title to someone else in its entirety and you are no longer on title with them, the loan would be called due and payable).  The trust or adding another to title now might make it easier for them to sell the property if something were to happen to you but unfortunately, it would not allow them to remain in the home without paying off the loan.  Since the loan would be due and payable, if they wanted to remain in the property, they would have to either have sufficient funds to pay off the loan themselves of seek other financing at that time to refinance the reverse mortgage loan that has become due.

I have no way of knowing if the property was vested in the name of the trust or to the family friend as an individual.  If the property was vested to the trust, then the successor trustee (your mom) would have had to contact the lender to settle the reverse mortgage when the primary borrower passed in February of 2016.  When the borrower first acquired the reverse mortgage, he designated an “alternate contact” on his loan.  This is an individual who the lender can contact in the event of incapacitation, death or for any reason if the borrower cannot be reached (if all contact is broken off as would be the case if the borrower passed).  I don’t know if your mom was that individual or not but that would be who the lender attempted to contact once they could no longer reach the borrower. 

If the property was vacant and no heirs contacted the lender to attempt to settle the reverse mortgage account, eventually, the lender would file a foreclosure action.  As your timeline suggests, the borrower passed in February of 2016 and that is when the loan became due and payable.  After a period of time, the lender would file a notice of default, there would be specified periods of time mandated by local laws during which the lender would have to wait until the property would finally go to foreclosure sale after various notices are filed (usually includes recorded notices, advertising, etc. before a lender can complete the foreclosure and can take a year or longer to finish).  The lender starts the actual Trustee’s Sale amount with only the amount owed on the loan plus any costs accrued and may not increase their bid at the sale (so if the house is worth more than the amount owed, the lender cannot bid against other purchasers in an attempt to make a profit).  If the home went back to the lender and ultimately HUD, then no other purchasers outbid the lender’s opening bid to acquire the property.  It sounds as though that after more than a year and a half, the property has gone to foreclosure and is now owned by HUD. 

If no one outbid the lender at the foreclosure sale it is likely the balance owed on the loan made it unattractive for other potential owners or investors to buy the property.  You may still be able to contact HUD and purchase the home based on the same consideration they give to heirs, 95% of the current market value if they  don’t have to pay for real estate services to sell the home.  I don’t know if this is an option or not. But if the balance owed was higher at the time of foreclosure, this would have been the same ultimate cost to keep the home at that time (the payoff amount on the loan or 95% of the current market value whichever is less) if they allow you to complete the transaction at this time under these terms.  It’s worth a shot if that is acceptable to you.  

Hi Kevin,

The vast majority of the time the lender is notified by services they subscribe to that monitor data bases such as the social security data base.  When individuals pass, hospitals, mortuaries and others are required to make certain notifications and there are services that monitor these data bases and can alert lenders and others when individuals receiving benefits have passed.

Hi Kevin,

There are very few trusts these days that do not meet the HUD parameters.  HUD is very concerned that the trust protects the borrowers' interests without causing issues when/if the borrower passes and most trusts do just that.  If you plan to place the property into a trust, just have your trust reviewed before you record the Deed that transfers the title and once you receive the approval, you can transfer the title with no issues.  If there are any changes that need to be made to the trust, they can easily be made before anything is recorded with the property.

I cannot answer this question without seeing the trust and having it reviewed.  Typically it is better if the trust is revocable, but there have been instances when irrevocable trusts have been approved as well.  You would have to submit the trust for approval and then we would be able to tell you if it would be acceptable and who would need to execute the loan documents.

Hi Glenda,

I would be willing to guess that lenders receive notification most of the time by means other than the family so when you ask "how much time...", I'm not sure if you are referring to the time before the lender finds out anyway or what.  I think that being ready and having a plan really helps when the time comes and expressing that plan to the servicer when called will make all the difference in the world.

HUD does have a provision to allow for Life Estates but you must be able to meet the HUD parameters as specified below.  Since I believe the way you have explained this the trust would be the "Remainder man", it would not meet the HUD requirements as stated but that could be determined with a full review of the circumstances if you wish to pursue it further.

Good Afternoon Helen,

There are some trusts that would not be acceptable but by and large, most trusts do meet the HUD parameters and therefore do allow borrowers to place the reverse mortgage on those properties.  However, if you are concerned that the trust in which your property is included does not meet HUD guidelines, we would be happy to go over it with you at your convenience.

Hello Mr. Muller,

You are welcome to close in your revocable trust. We must request a full copy and have it reviewed with our title companies trust attorney as a condition of your loan approval.  

Hi David,

I am sorry but I really can't advise you on such matters.  Each trust is a bit different and I don't know how your mom set hers up, nor could I give legal advice on the title even if I did have a copy.  I would suggest you contact the attorney your mom used to establish the trust if you don't have legal representation of your own you can ask questions of and I am sure they can tell you what steps you should take to ensure the title is as it should be.

Mike

Hi Blanca-

There is a trust review that has to be done by the lender to be certain that the trust does meet HUD guidelines but the cost of the review is sometimes covered by the lender and when it is not, it is usually less than $200 and can be added to the closing costs rather than paid in advance, out of pocket.  Most of the trusts we see do meet the guidelines but every once in a while we do need to get an amendment drawn up to meet the requirements and that is usually quick and easy.  The only way to know though is for you to submit the trust to the lender and let them do their review. 

The trust would have to be approved by the lender as meeting HUD guidelines and one of the things they look for is that the trust is revocable, not irrevocable (among other things). I am not an attorney and obviously could not give advice on a trust I had not seen even if I was so I would suggest that you find an attorney who renders legal opinions on trusts for lenders as to whether or not they meet HUD guidelines and have the trust reviewed. If it doesn't meet the standards and cannot be changed, the property would be ineligible for HUD lending programs and you really need to know that.