Hi Arlo,

My Father passed away on 5/15/19 at 91 years of age. He divorced his second wife of 12 years in 2007. She has since returned to her home country of Mexico with no further family contact since then. She quitclaimed her interest in the property in exchange for a $70,000 financial settlement with funds obtained from their reverse mortgage line of credit. His last will and testament list my brother and I as co-executors (Five surviving sons, we are not on title).

His estate does not require probate in California. Problem: Celink requires her verbal and/or written authorization for the estate and her to proceed with a deed-in-lieu of foreclosure since she is an original borrower and the property is upside down. Value is $280,000-$300,000. Loan Bal. is $320,000. We are not interested in selling the property, even at 95% of appraised value. She has not lived in the property since 10/2007 and all occupancy forms were signed by my father only.

Apparently, I am not an authorized person on Celink files, although I believe I was with Financial Freedom. So according to their reps, they cannot process this account any further. A second occupancy certification has been received. We can attempt to contact her and explain the situation to her (possible negative credit report) and hopefully she will comply with all requests in order to start the D-I-L-Foreclosure process.

Failing that, the non-response to the Occupancy Cert. will trigger a default. Insurance and property taxes are current and paid. With that said, I understand that even if an ultimate foreclosure were to occur, that neither his ex-wife nor the estate would be liable for a deficiency judgement as this is a non-recourse loan. Is that correct?

We have been paying insurance and Prop. Taxes. Any suggestions as to how to proceed in the interim? Keep paying or let it go and not worry about it or? I would just like to be done with this and move on. Thanks so much! -Steve

Hello Steve,

I understand the situation this puts you in and I also understand the situation that Celink is in now.  They need her to sign off on the authorization to complete the Deed in Lieu of Foreclosure or there are possible repercussions later.  They are better off to complete it sooner rather than later as well but must be certain there are no possible issues that could arise as a result of the path they choose.

On your end, if you are going to let the lender take the home, I can understand why you would want to let it happen as soon as possible to stop any additional expenses.  They also need either borrower authorization or court authorization to deal with anyone other than one of the original borrowers on the loan.

Keep this in mind, if the lender cannot accept the Deed in Lieu, they will go through the foreclosure process eventually.  You are correct, there would be no additional costs to you or the estate from the lender because a reverse mortgage is non-recourse.  However, the non-recourse nature of the debt may not protect the estate if something happens to a third party before the lender takes possession if you let the insurance lapse.

For example, if you do not insure the property, the lender will put on forced-placed coverage which covers only the dwelling, no contents and no liability.  If someone were to go onto the property and be injured, I do not know what the liability to the estate would be at that point.  The non-recourse nature of the debt would not protect you from other parties.

My suggestion is that if you have a way to contact your father’s ex-wife, make the attempt to get her to sign the authorization required.  Seems that would be minimal if any real cost and if it would allow you to present the Deed in Lieu of Foreclosure and have the obligation removed sooner, why not?

If that’s not possible, you may want to consult an attorney to determine any possible liability before you just cancel or cease payment on the insurance policy.  I cannot advise you on this because I honestly don’t know what your liability would be, but I would make the attempt to get your father’s ex-wife to sign that authorization if you are able to contact her.

It doesn’t cost anything to have it emailed if she has an email address and still not much if you have to use a mail or expedited service so I think it is well-worth the effort and little cost to obtain (plus it would make everything easier for you from this point for you as Celink would then be able to communicate with you on the loan as long as the authorization not only authorizes the Deed in Lieu but also authorizes Celink to work with you from this point forward on all matters relating to the loan).

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