My father passed away 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 and has had 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 lists my brother and me as co-executors (five surviving sons; we are not on the title). His estate does not require probate in California. Problem: Celink requires her verbal and written authorization for the estate to proceed with a deed-in-lieu of foreclosure since she is an original borrower and the property is upside down. The property’s value is $280,000-$300,000, and the loan balance is $320,000. We are not interested in selling the property, even at 95% of the appraised value. She last lived in the property in October 2007, and all occupancy forms were signed by my father only. I am not authorized on Celink files, although I believe I was with Financial Freedom. According to their representatives, they cannot process this account any further. A second occupancy certification has been received. We can attempt to contact her and explain the situation (possible negative credit report). Hopefully, she will comply with all requests to start the deed-in-lieu of the foreclosure process. Failing that, the non-response to the occupancy certification 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, neither his ex-wife nor the estate would be liable for a deficiency judgment as this is a non-recourse loan. Is that correct? We have been paying insurance and property taxes. Any suggestions on how to proceed in the interim? Should we keep paying or let it go and not worry about it? I want to be done with this and move on. Thanks so much! -Steve

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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 completing it sooner rather than later but must be sure there are no possible issues that could arise due to the path they choose.

Suppose you are going to let the lender take the home.  In that case, I understand why you would want to let it happen as soon as possible to stop 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. 

Remember, if the lender cannot accept the Deed in Lieu, they will eventually go through the foreclosure process.  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, suppose you do not insure the property.  In that case, 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.

I suggest you contact your father’s ex-wife and get her to sign the required authorization.  It seems that would be minimal if any, actual 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 cancel or cease payment on the insurance policy.  I cannot advise you on this because I honestly don’t know your liability.  Still, I would attempt to get your Father’s ex-wife to sign that authorization if you can 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 trim 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 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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