The process of taking out a reverse mortgage on a property that is in conservatorship takes a few steps, but it can be done.
Conservatorships are established when a court deems a person incapable of making certain decisions, and can encompass two categories: for a person, or for a person’s estate. Some conservatorships cover both aspects.
They are generally put into effect when someone petitions the court to be appointed a conservator of an individual (usually a relative), and/or that individual’s finances and estate, whom they deem to be incapable of making their own decisions.
For example, adult children will sometimes petition the court to appoint them as their parents’ conservator, if they feel their parents are no longer competent to make decisions related to their well-being or finances.
Before granting the conservatorship, the court requires the petitioner to establish that the individual is unable to manage his financial affairs or make decisions relating to other aspects of life.
How can conservators get a reverse mortgage?
Conservators have exclusive control over the conservatee’s affairs, and they must be able to show that their actions are taken with the best interests of the person in conservatorship (sometimes called a ward) in mind.
If you’re a conservator and you want to take out a reverse mortgage on your ward’s home, you’ll be required to get a probate court approval that will give you the ability to encumber the property with the loan.
From there, if the conservatee is deemed lacking in legal competency, you would have to complete counseling required of all would-be reverse mortgage borrowers (per the Federal Housing Administration’s rules for its Home Equity Conversion Mortgage (HECM) program) on behalf of your ward.
Even though you’ve already been court-appointed as someone’s conservator, the specific court approval for a reverse mortgage is necessary because lenders are required to prove a conservator’s authority to obligate a borrower with a loan.
Incompetent borrowers (i.e., individuals in conservatorships) are not able to sign any mortgage documents, so the conservator is required to execute any necessary documents. If you’re the conservator, that means you would be in charge of filling out the reverse mortgage application and signing the documents.
As part of the reverse mortgage loan application process, conservators are required to meet with the lender face-to-face, unless the property in question is 50 miles or further from the lender’s nearest office. For those outside of a 50-mile radius, a telephone interview is permitted.
Conservatorships vs. Power of Attorney
A conservatorship and a power of attorney are similar in that both authorize a person to take control over someone else’s financial affairs, including providing management of money and other properties. This encompasses the ability of powers of attorney to take out a reverse mortgage on behalf of someone else.
However, unlike conservators, those with financial powers of attorney are not required to be court-appointed. Rather, a power of attorney is generally designated by someone who is still legally sufficiently competent and has the wherewithal to make such an appointment.
Conservators have exclusive power over their wards’ affairs, but this is not the case for financial powers of attorney, where the person whose estate is in question still has decision-making rights.
As with conservatorships, though, those with power of attorney must be able to provide ample proof and documentation that the person they’re acting on behalf of is indeed incapacitated.
For example, a title company needs documentation in the form of a doctor’s letter if a power of attorney is seeking a reverse mortgage on a home, and someone on the property’s title is incapacitated.
Getting a reverse mortgage as a conservator is a somewhat different process than for a legally competent borrower. If you have any other questions about how to do this, we’d be happy to help.
If you have a question regarding conservatorships or power of attorney guidelines please call us Toll Free (800) 565-1722