Michael G. Branson, CEO of All Reverse Mortgage, Inc., and moderator of ARLO™, has 45 years of experience in mortgage banking, with the past 20 years devoted exclusively to reverse mortgages. A Forbes Real Estate Council member, he developed the industry's first fixed-rate jumbo reverse mortgage and has been featured in Forbes, Kiplinger, the LA Times, and Yahoo Finance. (License: NMLS# 14040)

Cliff Auerswald, President of All Reverse Mortgage, Inc., and co-creator of ARLO™ — the industry's first real-time reverse mortgage pricing engine — has 27 years of experience in mortgage banking, with 20+ years focused exclusively on reverse mortgages. A recognized expert in reverse mortgage technology and consumer education, he has been featured in Kiplinger, Yahoo Finance, Realtor.com, and HousingWire. (License: NMLS# 14041)

How a Reverse Mortgage Deed in Lieu of Foreclosure Works

By Michael G. Branson

CEO · 45 yrs in mortgage banking

Edited By Cliff Auerswald

President · All Reverse Mortgage Inc.

Updated Sep 19, 2022 ⏱ 7 min read ✓ Fact Checked HUD-Lender #26031-0007 76 comments

My mom procured a reverse mortgage when property values were high. She can no longer live alone in the home and has vacated it; we cannot sell it because the home has devalued in accordance with the failed economy. The family is attempting to process, through an attorney, a Deed in Lieu of Foreclosure, but the loan has been transferred to 3 different loan companies since mom vacated the property 5 months ago, and they have ignored the attorney’s letters and continue to send mailings telling my mom that they will continue to service her “loan” as always.

The Reverse Mortgage Is a Non-Recourse Loan

In the case of a reverse mortgage, several options are available if your mother decides to vacate the property. Once she notifies the loan servicer of her departure, she can choose how to proceed:

Selling the Home: She has the option to sell the property. If the home’s equity is depleted and neither you nor any other heirs are inclined to keep it, your mother or the heirs can sell the home for 95% of its current market value. This is a unique feature of reverse mortgages, allowing for a sale at a reduced price, which can be particularly beneficial in a market downturn.
Lender Taking Ownership: If selling the home isn’t viable or there is no interest in retaining it, the lender can assume ownership. This can be executed through a Deed in Lieu of Foreclosure or through foreclosure, though a Deed in Lieu is generally more advantageous for the lender.

Some borrowers can find their loan balance exceeding their home’s current market value. However, this situation does not inherently negate the benefits of a reverse mortgage. Borrowers in this scenario have received funds exceeding their home’s worth and had the opportunity to live in their property for years without mortgage payments.

Under the reverse mortgage agreement, borrowers are not obligated to pay beyond the home’s current market value when the loan amount exceeds the home’s value.

The insurance paid to HUD provides a safety net, allowing homeowners to receive funds beyond the value of their home, avoid interest payments, and ensure there are no financial claims against them or their heirs. This aspect of reverse mortgages offers significant financial relief, allowing for a mortgage-free living experience.

Stability and Protection

Borrowers with conventional mortgages faced significant challenges during the economic downturn. Many grappled with loan interest payments exceeding their homes’ current values, leading to dire circumstances. As property values plummeted, these homeowners often found themselves trapped in a cycle of payments they could no longer afford, eventually losing their homes and financial security.

In contrast, your mother’s situation with her reverse mortgage highlights its distinct advantages. A key benefit of her reverse mortgage was the assurance of a secure home for as long as she desired, without the burden of monthly mortgage payments. Her only responsibilities were the upkeep of taxes and insurance. This arrangement starkly contrasts with the experiences of those with standard mortgages, who often faced the loss of their homes and financial instability while struggling to keep up with mortgage payments.

For the past nine years, your mother has enjoyed the peace of living in her home without making any loan payments. This isn’t to downplay her challenges but to acknowledge the protections her reverse mortgage provides. The economic collapse and the subsequent decline in property values were widespread issues impacting homeowners. However, it’s worth considering how fortunate your mother was to have a reverse mortgage during this period, providing her with stability and protection that a conventional mortgage might not have offered.

Regarding the current situation, your mother can be assured of a stress-free transition. Another benefit of the reverse mortgage is its flexibility in moving out. Once she leaves and her belongings are moved, if the family decides not to retain the home, inform the loan servicer of her departure. The servicer will then initiate the process of reclaiming the property, which can be done without legal assistance. This process is straightforward and designed to be as hassle-free as possible, ensuring your mother’s and your family’s peace of mind.

Top FAQs

What is a deed in lieu of foreclosure in a reverse mortgage?

A Deed in Lieu of Foreclosure is when the property owner signs the property’s title over to the lender so that the lender is not required to foreclose on their security interest (their Deed of Trust) to obtain title to the property. The borrower or the borrower’s heir who has the authority to grant title can Deed the title to the lender if they do not wish to keep the home and have no desire to try to sell the home.

Why is a deed in lieu better than foreclosure?

Borrowers or heirs sometimes choose to sign a Deed to the lender in lieu of foreclosure to simplify and expedite the process. With a reverse mortgage, there is never any recourse in addition to the property itself (meaning the lender cannot look to any other assets of the borrower or the borrower’s heirs for repayment of the loan). The only security the lender holds is the property. Therefore, borrowers and their heirs can often significantly reduce the amount of time and effort they need to expend if they participate in a Deed in Lieu of foreclosure, which allows them to transfer title to the lender and step away from a property they have no intention of trying to keep or sell. If the borrower or their heir wishes to keep or sell the home, they would not be interested in a Deed in Lieu of Foreclosure and would certainly not wish to be caught up in a foreclosure process.

What is the most significant disadvantage of a lender of a deed in lieu of foreclosure?

The lender agrees to take the property “As Is” by accepting a Deed in Lieu of Foreclosure. Therefore, the lender will require that the home be free of all other encumbrances and liens and empty of all personal property. The home must be “broom clean” and ready for the lender to take possession. Broom clean does not mean that the home must be scoured and spotless, but it must have all personal items removed and the floors swept of any debris.

Can a lender foreclose on a reverse mortgage?

A reverse mortgage is like any other loan in that there are requirements of the loan that, if not met, could cause the borrower to be declared in default, and the lender can foreclose if the default is not cured. Those defaults include if the borrower does not live in the home as their primary residence (which could include moving to a new location or death), not paying the property taxes, insurance, or other property charges when due, or not reasonably maintaining the home. Borrowers must occupy the property for more than half the year for it to qualify as their principal residence, and any vacancies of 60 days or more (such as extended vacations) should be reported to the lender or servicer of the loan so that the lender can be sure that the home is adequately secure during extended absences.

How long does a foreclosure on a reverse mortgage take?

Foreclosures can be as quick as 5 and a half months or drag on to more than 2 years in some instances. It all depends on where the property is located, what the foreclosure laws are in the area, the time required for services that HUD and the lender require for the foreclosure process (which can include an appraisal, title, and other third-party services), and any legal motions filed. Typically, foreclosures do not begin immediately, and the timeline doesn’t start until the first notice of default is filed in the county where the property is located. The bottom line is that a reverse mortgage foreclosure will take just about as long as a forward or traditional loan once the Notice of Default has been filed. Borrowers who wish to resolve their issues with a reverse mortgage lender should always attempt to do so before this notice is filed rather than wait until the foreclosure begins. The clock is ticking (as with any foreclosure action).

Navigating a Deed in Lieu of Foreclosure? Whether you’re the borrower or an heir, we can help you understand your options — including the 95% payoff rule and how to work with your servicer. Call All Reverse Mortgage, Inc. (ARLO™) at (800) 565-1722 or get a free consultation online.

ARLO recommends these helpful resources:

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76 Comments on this Article

Barbara
August 21st, 2025

How do I contact HUD regarding my deceased parents' home and the upcoming auction? Can I change a Deed in Lieu of Foreclosure before the sale and sell the property to a third party? I haven't heard from HUD at all. It's been almost two years.
Reply to Barbara
- Michael Branson
  August 21st, 2025
  
  Hello Barbara,
  Up until the day the property goes to foreclosure sale, it still belongs to the original owner, their estate, or their heirs - if you've made arrangements to transfer the title into your name. If you already signed a Deed in Lieu of Foreclosure, I honestly do not know how that affects your rights if the deed was never recorded. You would need to speak with a real estate attorney to determine whether you could rescind the deed after it was signed and delivered to the lender.
  If it has already been recorded, title has passed to the lender, and I am not aware of any way to take title back once it has transferred to another party. That said, it never hurts to ask an attorney if there are any provisions that might allow for rescission under specific circumstances. These are legal questions, and I'm afraid I cannot provide legal advice.
  Reply to Michael
Julie A.
July 10th, 2025

As the beneficiary surrendering a reverse mortgage after the six month period has expired, and after sending a letter of intent to pursue a Deed in Lieu (DIL), do I still have to maintain homeowners insurance?
Reply to Julie
- Michael Branson
  July 10th, 2025
  
  Hello Julie,
  This is a matter where you should absolutely speak with your estate attorney. We are not able to provide legal advice, and letting homeowners insurance lapse - or canceling it before the lender takes ownership - could have legal or financial consequences beyond the scope of our guidance.
  If the lender is forced to step in and place coverage due to non-payment, they will obtain what's called "force-placed insurance." This type of policy only protects the structure of the home - it does not cover contents or offer liability coverage. Since the lender is not the legal owner, they are only protecting their financial interest in the property, not the estate or its beneficiaries.
  Only you and your attorney can determine whether canceling the policy exposes the estate to any potential liability. For example, if someone were to enter the property and be injured, there could still be risk - depending on whether the estate has remaining assets.
  We recommend discussing this with your attorney to make sure all responsibilities are met and to avoid any unintended exposure.
  Reply to Michael
Sarah
April 6th, 2025

Hi,
My grandma has to move out of her home, which has a reverse mortgage, and into a memory care facility due to dementia. We're relocating her to be near family, but her home is in another state.
We'd like to pursue a Deed in Lieu of Foreclosure since there's no equity - she owes substantially more than the home is worth. However, during a recent visit, we discovered several roof leaks that caused significant water damage to the second floor. After checking some of her records, I'm concerned she may have let the homeowner's insurance lapse back in December.
How should we proceed? We have no interest in keeping or selling the property since we're out of state.
Reply to Sarah
- Michael Branson
  April 7th, 2025
  
  Hello Sarah,
  The first step is to make sure all of your grandmother's personal belongings are removed from the home, and that the property is left "broom clean.” That simply means the home should be free of debris and swept - it doesn't need to be deep cleaned, painted, or repaired.
  In order to proceed with a Deed in Lieu of Foreclosure, someone must have valid power of attorney that allows them to sign legal documents on your grandmother's behalf - especially if she no longer has legal capacity due to dementia. If no such power of attorney exists, the lender will likely need to proceed with a foreclosure.
  Either way, the reverse mortgage is a non-recourse loan, meaning the lender cannot seek repayment from any party or asset other than the home itself. I strongly encourage you to speak with your family attorney about the best course of action. They can advise you on your legal standing and how to proceed with either option.
  Once the home is vacant, contact the loan servicer and inform them that your grandmother has permanently vacated the home for medical reasons and will not be returning. Let them know the family has no interest in keeping the property or repaying the loan, and that they'll need to proceed with either a Deed in Lieu or foreclosure. Also notify them that the home is vacant so they can take appropriate steps to secure the property.
  From there, I recommend doing everything you can to assist with the transfer of title, but keep in mind: you are not responsible for the loan or the property. It's up to the lender to complete the Deed in Lieu process or foreclose once they're notified.
  You're doing the right thing by asking questions and taking steps to handle this responsibly. If you have any uncertainties, your attorney is the best person to guide you through the legal aspects.
  Reply to Michael
Lois E.
September 11th, 2024

Thank you for your reply to my last email. My question is: Does "broom clean" include appliances (washer, range, etc.)? Do I need to remove large appliances? Thanks!
Reply to Lois
- Michael Branson
  September 14th, 2024
  
  Hello Lois,
  Any built-in appliances should remain with the house. This typically includes items like dishwashers and ranges. Some refrigerators are freestanding, while others are built-in. If your refrigerator is freestanding, you can take it with you as personal property. If it's built into the wall, it should be left behind. Clothes washers and dryers are usually freestanding and can be removed as well.
  Let me know if you need more clarification!
  Reply to Michael
Penny
August 29th, 2024

My boyfriend (84) has a reverse mortgage on his home. He says that the 'note' comes due in December, and he believes that at that time, he will need to satisfy the note, either by selling the house to get the equity out, paying off the note, or refinancing. That doesn't make sense to me, as it's supposed to be a reverse mortgage, and he still lives in the property, maintains it, and pays taxes and insurance. The note shouldn't require payment until he no longer satisfies the conditions of the reverse mortgage, right? He seems to think that the mortgage and note are two distinct entities.
Reply to Penny
- Michael Branson
  August 31st, 2024
  
  Hello Penny,
  Let's start by defining the two instruments: the Note and the Mortgage/Deed of Trust. The Note, also known as a Promissory Note, is your boyfriend's promise to repay the loan under the agreed terms. The Mortgage or Deed of Trust is the recorded document that secures the lien on the property. Depending on the state where the property is located, either a Mortgage or a Deed of Trust will be used. While I won't go into the reasons why different states use one instrument or the other, it's important to know that your boyfriend is correct - there are two different documents with every loan: the Note, which outlines the terms of the promise to repay, and the Deed of Trust or Mortgage, which secures the lien against the property. Many people use the term "Mortgage" even when the actual document is a Deed of Trust. If his loan is a HUD HECM reverse mortgage, there are actually two Notes and two Deeds of Trust or Mortgages to secure any amounts advanced by the lender and HUD at the same time.
  If I haven't lost you yet, aside from the most popular HUD program, there are also private programs with different terms. I can reassure you that the most common program, the HUD HECM, has no call date, meaning that as long as your boyfriend continues to live in the home and meets the program requirements, he can stay in the home for the rest of his life. My guess is that he received a loan with a payment plan that ends on that date, but that does not mean the loan itself becomes due at that time. If he has the HUD program, he will no longer receive payments as of that date, but he can still live in the home without having to repay the loan until he is no longer residing in the home as his primary residence or if he defaults on the terms, such as by not paying taxes and insurance.
  There's always a possibility that he has a program other than the HUD HECM with different terms, but if that's the case, it's not something I've encountered. The best thing he can do is review his loan documents again to determine the actual terms. While I cannot give assurances about documents I haven't seen, I would bet it's probably a payment that ends on that date and not a call date for the loan. He can always check with his servicer or consult an attorney if he's not 100% sure.
  Reply to Michael
Elizabeth W.
December 26th, 2023

My uncle died with a sizable HECM balance almost equal to the house value. The estate would like to sell the house (might yield minimal profit) but his roommate ( with no lease but pays utilities) refuses to move out. He has found a lawyer. The estate is considering a deed in lieu of foreclosure OR foreclosure. Does the house need to be vacant and cleaned out? Can the executor choose to walk away?
Reply to Elizabeth
- Michael Branson
  December 26th, 2023
  
  Hello Elizabeth,
  I can't give you legal advice regarding the tenant, but about the loan, to accept a Deed in Lieu of Foreclosure, the home must be vacant and broom clean. If not, the lender must complete a foreclosure to ensure there are no liens or other title claims and that they can legally clear out any personal items in the property and dispose of them.
  If that is your choice, you can walk away from the property, and you will not owe the lender anything. Their only recourse is the property. They cannot accept a Deed in Lieu with it occupied, but they will proceed with the foreclosure process as allowed by law (albeit probably slower if the tenant's attorney puts obstacles in their way, but it will eventually happen, and it won't affect you).
  Reply to Michael
Brett K.
February 11th, 2023

Hello Arlo,
My dad is 91, he appointed me as POA, a few years back. Unfortunately, he now has dementia. I've had to place him in a long term skilled nursing facility. He has a reverse mortgage thru NOVAD, he has a line of credit with them, that he never used. If I were to do a deed in lieu on his house, and HUD accepts it, then I'm assuming they hire a realtor to sell the house, to pay back the loan ($106K). However, my question is If that happens, and the property sell for more than $106K what happens to the proceeds from the sale of the house? Does it go to NOVAD? Or my brother and me?
Reply to Brett
- Michael Branson
  February 11th, 2023
  
  Hello Brett,
  
  If you believe there is equity in the home the last thing you want to do is sign a Deed in Lieu of Foreclosure back to the lender! Once you do that, you are completely out of the loop and you are no longer having to concern yourself with the property, but you also would not receive any of the portion of the sale price. I suggest that you look at dad's latest statement. If the $106,000 is accurate or close, the next thing you should do is contact a senior real estate specialist in the area to determine the most likely sale price for the home.
  If there is equity left in the home, you and your brother should take all personal property out of the home that you wish to keep. Afterwards, if there are still sufficient items left that neither you nor your brother can use, the senior specialist usually has connections with estate sales professionals who can go into the home and conduct an estate sale which will do 3 things: 1) sell all unwanted items possible and give you some additional assets you can use for dad; 2) donate any remaining items at the conclusion of the sale which will give you a receipt for the donation to help offset dad's tax liability; and 3) they will have everything out of the house so it is ready for the real estate agent to sell the home.
  
  When the house is on the market (which should be within a couple of weeks if all goes well), you can also send the Power of Attorney (POA) to NOVAD to let them know that you are empowered to act on all matters concerning your dad, his property, and the loan. This will be important later when the sale is ready to close, and the escrow company is trying to get a Beneficiary's Demand for Payoff, and they will not have dad's signature and need to use yours.
  Be sure that you send the POA to NOVAD via registered mail or some other method by which you have signed receipt of delivery. It is completely up to you whether you also inform them of his leaving the home at that time, but I do not think I would make that declaration unless you had made the decision for sure that you were going to do the Deed in Lieu of Foreclosure. He can be away from the home for up to 12 months for medical reasons and if it were to turn out that his move was temporary, that could be messy. I would want to be sure that the move was indeed permanent before I had the lender pushing me with a possible foreclosure action before I was forced to act on my own (but that is just me).
  If you sell the home in the next few months or if you determine after speaking with a real estate agent that there is no equity remaining and you are going to let the lender take the home after all, nothing has been lost by waiting to inform the lender after you have made the initial inquiries. And if you do sell the home yourselves because there is equity remaining, you can use it for dad's expenses or split with your brother depending on circumstances and how dad's needs have been planned for.
  Reply to Michael
William M.
September 18th, 2022

Hello Arlo,
My mortgage is "underwater" and I applied to Novad for a Deed in Lieu of Foreclosure. They said fine and proceeded to execute but they told me that I had a title problem. They said when the loans were sold from IndyMac bank to OneWest Bank an error was made in the "assignment of the security deed." That clouds my title, and they can't proceed with the DLF until that problem is solved. No date given. Are you aware of this situation and does it apply to all reverse mortgages sold in that portfolio? They don't provide updates so what recourse do I have?
Reply to William
- Michael Branson
  September 18th, 2022
  
  Hello William,
  
  I am not aware of the issue you describe and therefore I do not know if this is a one-time issue or a recurring issue with many different loans. What I can tell you though is that the title concern means that the lender cannot accept a Deed in Lieu of Foreclosure. To accept a Deed in Lieu of Foreclosure, there can be no other liens on title, the title must be clear, and the property must be empty and "broom clean". However, a default is a default, and the lender can still foreclose upon default.
  
  NOVAD is the servicer for HUD and HUD has taken assignment of the loan which makes them the lender at this point. The terms of the loan are still the same. The loan is a non-recourse loan which means that the lender has no other security other than the property and if you default on the loan, the only recourse the lender has is to foreclose on the loan. They can look to no other assets to repay the obligation. Whatever your reasons were for wanting to give HUD a Deed in Lieu of foreclosure rather than continue to just live in the property payment free I assume that those reasons have not changed?
  Whether the property has become too much for you to maintain, you cannot access it due to health concerns, you need to move to assisted living or whatever your reasons, you must have a good reason to let the property go because regardless of how far upside down the home is, you could continue to stay in the home for life as long as you pay the taxes and insurance in a timely manner and that is usually less expensive than rent or the costs of living elsewhere. If HUD cannot accept the Deed in Lieu of Foreclosure, you can still choose to move out and notify NOVAD that you have had to abandon the property.
  
  The lender/servicer will take steps to secure the home and start foreclosure proceedings. But before you do that, you need to be sure that you have your personal belongings out of the home because once they secure the home, they will most likely change locks in some manner that may make it impossible for you to reenter the abandoned dwelling. Keep one thing in mind, this is not legal advice! You should contact an attorney to be certain that there are no other issues pertaining to your circumstances that you need to resolve. I can only advise you about the loan and your loan documents for a reverse mortgage specifically state that the loan is a non-recourse loan.
  The lender can only foreclose and take the home for repayment of the obligation but if there are any other issues you need to consider regarding family, liability, etc., you need to discuss with your attorney. You can probably resolve it in one visit and possibly even find free legal aid if you do not have an attorney so I would wholeheartedly suggest that you speak to an attorney before making any final decisions. The bottom line though is that you do not have to wait for the lender or the servicer to get their documents to make a move if you are not able to do so.
  Reply to Michael
Di
August 30th, 2022

Hi ARLO,
My father passed away and had a reverse mortgage. He had no will and we siblings have no estate set up. We have sent a letter to the reverse mortgage that he has passed away and we have no interest in the home. There is also a flood claim that was submitted just a week after his passing, in which we have also informed the bank about the claim which has been turned. The flood claim is ready to make a check paid out to the reverse mortgage and my father's name (estate of). Do we have any other obligation than just to advise the bank and the insurance company to deal with each other. The amount of payout would be way above the amount of the outstanding loan for the loan company. We just want to be able to walk away from this home. Can we do so without signing a deed of lieu? Again, there was no will, and no estate set up.
Reply to Di
- Michael Branson
  August 30th, 2022
  
  Hello Di,
  
  You can't sign a Deed in Lieu of Foreclosure at this time unless you go through the work to change the title into your name. Since the title is in the name of your father (his estate now), you have no way to sign a Deed to transfer title because you don't own the property. You've already notified the lender that you have no interest in the property and they are listed as an "other insured" on all insurance policies now so they should have already been in contact with the insurer, but I think it was kind of you to let them know anyway.
  I can't give you legal advice, but I can tell you that the loan is a non-recourse loan and the lender's next action would be to initiate foreclosure proceedings since the borrower no longer occupies the property and the heirs have indicated they do not wish to retain or sell the home. I would just be certain that all personal property was out of the home and let the lender proceed if it was me and I had no intention of keeping the home or selling it myself.
  
  But I would also advise you to be sure that you check with a local senior real estate specialist first to be certain that there is no equity in the property after the flood damage is repaired. If by repairing the home with the insurance proceeds it will sell for more than the amount owed, it might be worth the effort to have the probate completed with the title and then sell the home to retain the equity for the estate or the siblings.
  After you talk with a senior real estate specialist (someone who specializes in selling homes previously owned by seniors in that area and can tell you what it really would bring in its current condition after the flood damage is repaired), you could decide if it was worth the effort to speak with an estate attorney to determine the costs and effort to complete the probate of the title.
  If there is some equity but not a lot, perhaps some of the siblings would be interested and others can remain uninvolved if they wish. If there is no equity, you have lost nothing but a conversation with a real estate agent and you can let the lender take the home via foreclosure with no liability to you or your siblings (but don't forget to make sure you have left nothing in the home you wish to keep any personal property still in the home at this time).
  Reply to Michael
David B.
June 10th, 2022

My loan has been turned over to HUD. Do I need an attorney to do a deed in lieu of foreclosure?
Reply to David
- Michael Branson
  June 10th, 2022
  
  Hello David,
  
  Loans are assigned to HUD as an automatic process once the loan to value hits a specific level based on the original value when the loan was closed. The terms of the loan do not change as a result of this action. You can still remain in the home for life under the original terms of the loan and you still have the same rights and options as if the loan was still being serviced by your original lender (although HUD's servicer, NOVAD, is notoriously slow and is even worse since Covid).
  My advice to all homeowners is to take your most recent statement and speak with a senior real estate specialist in your area to determine if there is any equity remaining in your home based on the sales in the area. If so, they can sell the home and any equity is still yours. Many people are surprised at how much real estate has risen in value (even when repairs and updating is necessary) and are not aware that there may be some money left on the table if they walk away from the property.
  
  If the sales indicate that you do not have remaining equity in the home, you can still continue to live in the home making no monthly payments on the reverse mortgage (you do need to keep paying the taxes and insurance to be in compliance with the loan terms). If for any reason you are unable to remain in the home, you can contact the servicer of your loan at the number and address on your statements and let them know that you must vacate the residence and that you would like to offer the Deed in Lieu of foreclosure.
  They will let you know if they can accept it after they perform an appraisal and do a title search and they may not be able to accept a Deed in Lieu, but you are still not prohibited from moving away from the home and letting the servicer foreclose on the loan. The reverse mortgage is a non-recourse loan which means that the only recourse the lender has for repayment of the loan is the property, they cannot look to you or any other assets for repayment of the loan.
  If you wish to have an attorney represent you for any reason or if you have other questions for any reason at all, you certainly can and you can never have too much information (especially if you are concerned about insurance issues or any other possible liability aside from the loan and lender).
  But if the lender does not accept your offer to accept a Deed in Lieu of foreclosure when you must leave the property and you contact the servicer to let them know when you vacate the home, they will take steps to secure the property and begin the foreclosure process.
  Reply to Michael
C. Mason
May 23rd, 2022

Hi Arlo,
I am the administrator of my husband's estate. His death occurred December 2019. There's no evidence that lender or servicer has made attempts to foreclose. The heir of the property would like to deed property to lender in lieu of foreclosure. The requested documents have been submitted and there has not been any response from servicer. The insurance, utilities and property taxes are not being paid by family. The interior and exterior of the home is no longer being maintained.
What action should I take or do nothing?
Reply to C.
- Michael Branson
  May 23rd, 2022
  
  I really can't advise you but I can give you a little food for thought. Firstly, the reverse mortgage is a non-recourse loan. This means that the lender can only look to the property for repayment of the loan. They cannot look to any other asset of the estate to repay the obligation. I cannot tell you what actions any other entities may take against the estate or what liability, it any, the estate may have.
  For instance, if the heirs have not completed the transfer of the property to the lender and have stopped paying for insurance or utilities, the lender will force place insurance on the home that covers the dwelling only. If someone gets injured on the property there is no liability insurance at this and it is still in the owner's name. I can't tell you if that creates any liability for the estate or heirs, I just don't know. And I do not know if that is the only liability the property may still have or if the estate is insolvent or if that is even an issue anyway.
  I guess my recommendation to you would be to contact an estate attorney and get some legal advice to determine what, if any, liability the estate still has to others and make your decisions accordingly.
  Reply to Michael
Greg P.
November 6th, 2021

Hello Arlo,
My mother initiated a DIL on her property recently. The servicing company for HUD had a very helpful specialist that I coordinated with initially, and she noted that if my mother had trouble paying taxes after the DIL process starts, she can send the property tax bill to them, and they'd forward to HUD to pay it. Well, that woman left and now I'm stuck with far less helpful specialists that simply tell me that I was misinformed. Very frustrating. Is there any actual process or guidance for the tax payment in these circumstances?
Reply to Greg
- Michael Branson
  November 17th, 2021
  
  Hello Greg,
  
  I am afraid that I cannot advise you with regard to payment of taxes while the property is still in your mom's name. A lender can foreclose on a property if the borrower defaults and does not pay the property taxes but in this case, your mom is already giving the lender a Deed in Lieu of foreclosure.
  The threat of losing the property for non-payment of taxes is of little consequence. I am not a tax attorney though so I cannot tell you if there are any other tax ramifications for non-payment of taxes nor do I know if there is any equity left in the property or your mom's estate for that matter.
  I would suggest that you contact an attorney to discuss if there is any legal liability to mom's estate if those taxes remain unpaid and the lender must pay them. At least that way you can make an informed decision.
  Reply to Michael
Izzy
September 8th, 2021

Just in case some does happen to my grandparents how hard will it be to keep the property, will I have to contact a back and refinance the home?
Reply to Izzy
- Michael Branson
  September 22nd, 2021
  
  Hello Izzy,
  The loan becomes due and payable. If you wish to keep the home, you need to pay that loan off. That can be done by using funds you have in the bank or if the balance is higher than the amount of funds you have available to you, then a refinance loan is your best option. That would require you to obtain financing from a bank or other traditional lender at that time.
  Remember to do that, you must be on title to the home. This means you need to be sure your family has a clear plan so that you can obtain title to the home. Often heirs do not have such plans in place and especially if there is any question regarding who will take title when the owners pass, and in some cases some heirs who would like to keep the home are never able to do so.
  In such cases they often sell the home once the ownership is determined as the family has no plans in place for refinancing and their time is growing short. By knowing what you will do in advance and having plans in place you can cut down on the time needed to execute your plan and be sure you will be successful.
  Reply to Michael
Jeri T.
February 15th, 2021

My brother passed away...We bought home together and I lived with him. He applied for Reverse Mortgage when he became eligible. My name is on the grant deed... How can I assume grant deed?
Reply to Jeri
- Michael Branson
  February 15th, 2021
  
  Hello Jeri,
  If you are on the title now (the Grant Deed when you bought the property had both your names on it granting title to both of you), it would just be a matter of how the title was vested.
  If the title was vested with right of survivorship, then you would automatically get the title to the entire property. If the title was vested as tenants in common (you each owned a share of the home), then his share of the property would go to his heir as determined by his will or a court order.
  I would suggest you contact an attorney in your area to determine exactly what you need to do to have the title passed to you, especially if you live in a state like Texas with strong heirship laws and if he has any children or other heirs.
  On a side note, if you were not on the loan, the reverse mortgage is now due and payable and you need to make provisions to refinance the loan if you plan to keep the property as the lender will be looking for repayment now that he is no longer living in the home.
  Reply to Michael
Peggy
January 13th, 2021

Per the deceased last borrower on a reverse mortgage, I am executor of estate and I signed paper to expedite deed in lieu and title company did the search to clear property of any encompass they are now asking heirs to sign property back and not accepting executor only. Why is that necessary?
Reply to Peggy
- Michael Branson
  January 13th, 2021
  
  Hi Peggy,
  
  I honestly cannot answer that. I do not know how the document was prepared to grant you your authority, the language in the document, if there is any limit to that authority or in which state the property is located.
  It could be just that the property is in one of the states that has very strong heirship laws that require more participation from possible heirs. This reminds me of something the state of Texas might require.
  At any rate, if you feel that the requirements are too onerous, you can seek legal counsel. The lender probably does not have the same issues if they foreclose rather than take a Deed in Lieu of Foreclosure but I would always recommend that you seek legal counsel to determine if there are any other negative ramifications before you make that decision.
  I cannot give you legal advice and do not know if such an action might adversely affect something else, I can only tell you what effect the foreclosure or Deed in Lieu might have on the lender's position and that might not be the best for you or the rest of the heirs. I think it is always worth the time and expense for the advice of legal counsel.
  Reply to Michael
Natalie H.
December 28th, 2020

Are we required to continue paying utilities, like water and lights after we have advised the mortgage company, we elect the Deed in Lieu of Foreclosure option?
Reply to Natalie
- Michael Branson
  December 28th, 2020
  
  Hello Natalie,
  
  The reverse mortgage is a non-recourse loan and that means that you will never owe the lender more than the value or the property for repayment of the loan.
  The thing that most borrowers and heirs do not take into consideration though is that the ownership of the property still belongs to the borrowers or their estate until the lender forecloses and the Deed records or the Deed in Lieu of Foreclosure records which conveys title to the lender.
  So, what does this mean? If you cease paying the utilities and something happens that causes a situation where liability exists, that liability is still on the owner or the estate.
  A good example of this would be if the insurance lapses before the lender takes title and someone is injured on the property, the owner or the estate may be subject to lawsuit.
  If the water is turned off, the city cites violations due to weeds and dead grass or worse, if there is a pool and with no electricity the filter does not run and it becomes a breeding ground for mosquitos (it has happened), then the liability would not be the lender's but the owners or that of their estate.
  Also, if the lender does their inspection and finds the property in disrepair, to avoid any liability, they will not accept a Deed in Lieu of Foreclosure and would insist on going through a full foreclosure process so that any other liens, etc. would not become their liability.
  You could wind up hurting your chances to accelerate the process and force a full foreclosure giving you even more liability.
  I always advise owners and heirs to make sure that they are not so worried about a few small expenses that they open themselves to possible large liabilities and wait for the property to transfer before shutting off or cancelling things like this and insurance but only you can make this call.
  Reply to Michael
AFS
November 11th, 2020

Hi ARLO,
My mother passed and in probate they have titled the house to the heirs. We are going to go forward with deed in lieu.
Does titling over to heirs via probate affect the deed in lieu process?
Mortgager wants probate documents and probate indicates they must title to heirs.
Reply to AFS
- Michael Branson
  November 11th, 2020
  
  Good Afternoon,
  
  The title must be legally passed to the heirs to allow the heirs to Deed the property to the lender.
  The Deed in Lieu is just that, a Deed that grants title to the lender so that they can take the property and begin the process of resale in lieu of going through a whole foreclosure action that achieves the same end result.
  The sooner the lender has title to the property, the sooner the estate no longer has any liability for the property so it works better in many instances for both the heirs and the lender if the heirs have no intention of selling or keeping the home.
  The lender will require a copy of the documents as you indicate to verify that the title has been passed to the heirs and that they have legal right to Deed the property back to the lender.
  Otherwise, without legal title, the heirs cannot Deed a property that they do not own to the lender or anyone else for that matter.
  Reply to Michael
Marlent
September 8th, 2020

Hello ARLO,
My mom has a reverse mortgage, she became very ill and moved out of the property and has been living with me for 3 months. I recently went to pick up her personal belongings to her property and found the roof of the house has collapsed in several areas of the home. The house is not habitable, and she will not be returning to the property. What is going to happen now, what are the repercussions from the lender? I have contacted a local realtor, and there is no equity in the property. Can we offer a deed in lieu of foreclosure or that is not an option?
Reply to Marlent
- Michael Branson
  September 8th, 2020
  
  Hello Marlent,
  
  Have you contacted her insurance yet or filed a claim? I would do that first and have the damage repaired and then contact the lender or check again with a realtor after the work has been completed.
  The lender cannot accept a Deed in Lieu of its current condition and if anyone were to venture onto the property and become injured or anything else were to happen, mom is still the owner of the property and still liable.
  I don't know the condition of the rest of the property or the value but if the insurance covered repairs will make the property worth more than is owed, why take on the liability and walk away from the equity?
  If there is still no equity to be had, contact the lender, and see if they will offer any kind of compensation for your cooperation with the insurance and repairs.
  It never hurts to ask.
  Reply to Michael
Bethany L.
August 14th, 2020

If the borrower dies and the heirs offer a deed in lieu of foreclosure, can any prorated portion of the prepaid property taxes be recovered by the heirs?
Reply to Bethany
- Michael Branson
  August 14th, 2020
  
  Hi Bethany,
  
  Taxes are not paid to the lender and I am not aware of any lender repaying any borrower or heir for taxes paid but having said that, I see no reason why you would not ask.
  The quicker the home can be placed back on the market for sale, the sooner HUD's and the lender's losses can be stopped.
  Therefore, if you can offer the lender a viable reason to reimburse you for taxes paid while offering to speed up the process which helps the lender and HUD, you may find them very agreeable. It never hurts to ask in any case!
  Reply to Michael
Laurie V.
July 7th, 2020

My Mother passed away, and we are opting for deed-in-lieu of Foreclosure, what happens to all the bills owed at this point? Homeowner's Fees, Electricity, Property taxes? I am just finding all these bills.... who pays for this?
Reply to Laurie
- Michael Branson
  July 7th, 2020
  
  Hello Laurie,
  
  The home belonged to your mom and any of the costs that she incurred while she owned it would still be an expense she or her estate owed.
  If there are liens as a result of the outstanding bills, then the lender would not be able to accept a Deed in Lieu of foreclosure anyway as the liens that are junior to the mortgage would be removed with a foreclosure action but if they accepted a Deed in Lieu, they would "inherit" any other liens from unpaid obligations that the borrower owed.
  I honestly cannot tell you how creditors seek repayment from an estate after a person has passed and I would suggest that you contact an attorney for advice in this area.
  Reply to Michael
Pat
June 29th, 2020

Will be turning in keys but cannot get rid of large TV armoire. Can we just leave it?
Reply to Pat
- Michael Branson
  June 29th, 2020
  
  Hello Pat,
  
  The lender can only accept a Deed in Lieu of Foreclosure if the home is free of any other liens, all personal property has been removed and the property is "broom clean".
  If you leave any personal property in the home, the lender must wait and foreclose on the home and then take possession after the foreclosure at which time there is protection against any claims made for people who try to assert that their personal property is now gone and therefore the lender owes them something.
  There is no Goodwill, Salvation Army, or other charity willing to pick it up for resale? I would suggest you contact anyone looking for donations to see if they will accept it and pick it up.
  Reply to Michael
Jim B.
January 29th, 2020

My father-in-law died in Oct. The equity on the house was long gone. We started the deed in lieu paperwork with the govt who had the loan at the end. But when they respond us anyone's guess. Are we legally bound to continue HOA fees, gardener, etc.? This is costly, no one is in the house, and we have no idea when the gov't will get back to us.
Reply to Jim
- Michael Branson
  January 29th, 2020
  
  Hello Jim,
  
  I really suggest that you contact an attorney to ask about this issue. This is a legal issue and I cannot tell you what rights or consequences the HOA or the city may have against you as the heir or the estate if the dues are not kept current or the property is subject to city fines if the city levies a lien for not maintaining the property.
  Also, the attorney may be able to better determine what is delaying the Deed in Lieu process. If you have met all their conditions, the property is cleaned out of all personal possessions, is "broom clean" and there are no other liens on title, it really should not take that long (providing you had the rights to the title to sign the Deed in the first place).
  Reply to Michael
- Augustine S.
  April 10th, 2020
  
  If your HOA is in Florida you better keep up with it or the HOA will put a lien on it and Foreclose on it and it will be sold to a 3rd party. Know by experience.
  Reply to Augustine
  - Michael Branson
    April 13th, 2020
    
    Hello Augustine,
    This is why we always remind homeowners that the reverse mortgage is a non recourse debt and the lender only has certain remedies but you should always check with an attorney about other possible liability when it comes to other obligations and possible liability concerning your home if you don't pay other payments for which you agreed to be obligated.
    Reply to Michael
Louis
October 20th, 2019

My mother in law had flood caused by a pipe bursting, that resulted in 2 feet of water thru the whole home. The repair cost to replace all flooring and cabinets and vanities plus new drywall would exceed the the 15,000 insurance maximum coverage by more than 20,000, She does not have the money to pay for the repairs to sell the house. The balance of her reverse mortgage is more than the home's value in as is. Can she just walk away and notify the lender for a deed in lieu without paying for the repairs?
Reply to Louis
- Michael Branson
  October 23rd, 2019
  
  Hello Louis,
  
  She needs to contact the lender. They will work with her on her options as well as contacting the insurance company to start the repairs. If she chooses to leave the home, she can walk away with the lender's only recourse being the property itself. However, you need to know that if the borrower is leaving the home for other than medical reasons, then she is not eligible for other government insured loan programs as long as there is a delinquent amount outstanding and there may be tax implications so I would definitely check with an accountant as well.
  The lender also probably not be able to accept a Deed in Lieu of Foreclosure as to do so, the property must be "broom clean" and free of all other encumbrances. I do not believe that if the property is uninhabitable it will meet the definition of broom clean. I would strongly suggest that you contact the lender as well as an accountant to determine all options as well as any other ramifications.
  Reply to Michael
Sergio M.
September 4th, 2019

My mother had a reverse mortgage and has passed away. Mom had a will and left me and my brother as executors. All the family agrees to either sell or deed in lieu. The lender says Moms will is not valid and we have to submit trust documents or probate decision. Should a will be enough to complete the sale or deed in lieu? If not, what would happen if we just let it sit and go to foreclosure?
Reply to Sergio
- Michael Branson
  September 4th, 2019
  
  Hello Sergio,
  
  I cannot begin to guess why the trust is not adequate, there are numerous reasons why it could be deficient. You absolutely can let it go into foreclosure and that would be a great question for your lender. Tell them you do not intend to go through any other avenues then and invite them to begin foreclosure immediately and ask them what they would do.
  I suspect they will just initiate the foreclosure and that would probably be best for all of you BUT I am not an attorney or an accountant. Before you do this, I would suggest that you contact an estate attorney to just go over all the legal ramifications to make sure that this will not adversely affect you in any way.
  From a lender's perspective, I can tell you that the lender would rather obtain a Deed in Lieu of foreclosure because it is quicker and easier when it is available. But if there are any issues or clouds on title, the lender must go the foreclosure route to avoid having any title issues or liens transferred to them that would be removed in the foreclosure.
  If there is any question about your title or there are any liens on the property, the lender would not accept the Deed in Lieu of Foreclosure anyway and would have to complete the foreclosure process to ensure they did not inherit any problems.
  Reply to Michael
Tessa M.
August 15th, 2019

Thank you for the opportunity to ask this question. My father passed away and had a reverse mortgage (received lump sum). The heirs opted for the deed-in-lieu of foreclosure and the estate has maintained HOA, insurance, and property tax obligations to date. It has now been 14 months since initial request for deed-in-lieu and the property still isn't resolved. The estate funds are quickly depleting. Are there any disadvantages to allowing the property to go into traditional foreclosure since the deed-in-lieu process is taking too long and the heirs are not willing to pay out of pocket to maintain the HOA and insurance fees? Thanks!
Reply to Tessa
- Michael Branson
  August 15th, 2019
  
  Hi Tessa,
  
  14 months is a long time. Even a foreclosure doesn't typically take 14 months so a Deed in Lieu of Foreclosure certainly should not if they have approved it. Have you requested an accounting for the timing?
  I know that lenders have things they have to do in order to be able to accept a Deed in Lieu of Foreclosure because taking a Deed in Lieu means you accept the property as is and you inherit any other issues such as other liens, etc.
  A foreclosure would eliminate any subsequent liens and that's why some lenders must opt to foreclose instead of accepting the Deed but either way, it doesn't take 14 months to make the determination and to complete the transaction.
  
  The problem that you have in some cases is that you or the estate may have some other liability. If you plan to just walk and not pay the other assessments as due, I would first contact an attorney to determine if there are any other tax implications or possible liability if the property is not fully insured and someone is hurt on the premises while the estate still owns it, etc.
  As with most anything else, we usually just don't know what we don't know and that's what may come up and bite us in the end if we aren't careful.
  Make sure that the estate is covered against any potential liability and then you can make your decisions accordingly. I believe to adequately determine that, you would need the counsel of an estate attorney and we cannot give you legal advice. The attorney may also be able to help you with your timing issue.
  Reply to Michael
Valiece A.
July 25th, 2019

I've been paying my house taxes and didn't think it mattered if I just paid it once a year instead of twice a year and they sent me foreclosure papers. Who can I get to help?
Reply to Valiece
- Michael Branson
  July 29th, 2019
  
  Hello Valiece,
  It would not matter if you were paying both installments at the start. If you were letting the first installment get delinquent, that is not in keeping with the terms of the loan, but I am confused. I would find it extremely strange if the lender filed any kind of foreclosure based on no notice. Have you contacted them? Have they ever sent you any other notices?
  I have never heard of a lender filing a foreclosure for the first half of taxes being delinquent and especially if they had never notified you and this is an ongoing situation. I would strongly suggest that you contact your servicer and send them the verification that you had been paying the taxes in this manner all along and that you had never been notified by them in the past that this was unacceptable.
  Ask them to cancel the foreclosure since the taxes are current (hopefully they are now) and will be in the future now that you have received notification from them that your practice is not acceptable. If they are unwilling to cooperate, you should seek legal assistance immediately, do not wait for the sale date to get an attorney involved.
  Reply to Michael
Pamela B.
June 29th, 2019

Does a roof repair have to be made for a short sale or deed in lieu?
Reply to Pamela
- Michael Branson
  June 29th, 2019
  
  Hello Pamela,
  
  I am not sure I know what you are asking. Are you selling a home with a reverse mortgage on it or are you wanting to purchase a property that is being sold on a short sale and are using a reverse mortgage for your financing? Because if you are Deeding the property back to the lender or are selling the property and the roof needs repair, you really don't have to do anything.
  The lender would foreclose if you just walked away and the loan is a non-recourse loan so there is no personal liability. If you are purchasing with a reverse mortgage, all needed repairs would have to be completed before the loan could close and the seller would have to pay for the repairs.
  If the seller cannot or is not willing to make the repairs, sometimes the agents will make that decision to pay for the repairs, but it must be done prior to the close. Depending on the cost of the roof repair, the agents may be willing to kick in to save their commissions (if the sale falls through and the lender forecloses, they get nothing).
  Reply to Michael
Daughter
January 21st, 2019

My Mom would like to sign a Deed in Lieu of Foreclosure for her reverse mortgage. However, she (or the family) is not able to get it in a "swept clean " condition. There are still items in the garage that she or the family have been unable to remove. Why won't a reverse mortgage company accept a Deed in Lieu of Foreclosure in that situation when they will end up with everything left on the property anyway if it goes into foreclosure?
Reply to Daughter
- Michael Branson
  January 22nd, 2019
  
  Good Morning,
  
  That's a great question and one I had to ask myself when I first heard the requirement. After all, it does seem that one way would be just as acceptable as another since the ultimate ending is that the lender owns the home. So, I had to research it myself. I found that lenders cannot accept a Deed in Lieu of Foreclosure under all circumstances because by accepting the Deed, they accept ownership to the property "warts and all". If they accept a Deed and there are issues with the property such as other liens or if that property still in the garage represents other problems, the lender owns it and inherits those problems.
  
  By requiring the property to be empty, "broom clean" and free of liens, the lender can then accept the property free from other possible problems or liability. If they must take the home via foreclosure, there are laws to protect the lender from liability from those liens and possessions. There are established methods for disposal of the property left behind under a foreclosure that may not be true for property left behind otherwise. The lender is unwilling to accept any liability for ownership or future claims by other parties or other possible issue with personal property that would not come up with a foreclosure but may be an issue with a Deed in Lieu of Foreclosure.
  
  My suggestion is that if you absolutely do not want any of the items in the garage to contact a junk removal service and have them haul it away. They can usually have everything gone very quickly if it's all just going into the trash and the cost is not typically very high. If this is the only thing keeping you from being able to terminate your liability with the property, it seems that it may be a small price to pay. It's worth making a call to find out. We purchased a home and the garage was STUFFED full of junk from the previous owners who decided it was easier to leave it for us rather than to remove it themselves. It filled a two-car garage. Since we didn't want any of it, we called a local "got junk" service. For less than a $800 and they also got to keep anything they wanted to keep or recycle, in under 5 hours, their guys had everything out. It was worth it to us and you may have a service like that near your mom's home.
  Reply to Michael
Sherry
January 16th, 2019

My mother had a reverse mortgage and can no longer live in the house. She is 88 yrs. old and cannot pay back the loan. We were unable to sell the house. She lives in Massachusetts. We have notified the mortgage co that she would like to use the option of a deed in lieu of foreclosure. The house is empty. Does she have to continue to pay insurance, taxes and utilities while waiting for them to take ownership? And how long does this process take? Can she just drain the pipes and shut everything off? What are the legal ramifications? My mother does not have the funds to keep paying on the house.
Reply to Sherry
- Michael Branson
  January 16th, 2019
  
  Hello Sherry,
  
  I am afraid I cannot answer this question for you because the answer could include other liability for which I cannot consider. If mom has no insurance on the home and someone enters the property or gets hurt on the grounds, who is liable?
  If she turns off the utilities and something happens as a result and the city seeks damages (weed abatement, rodent control, etc.), who becomes liable for that? And if there is a lien placed on the home, the lender will not a Deed in Lieu of foreclosure to the property because if they do that, they agree to accept the property including any current liens, etc.
  
  One of the reasons that Deeds in Lieu of Foreclosure are not instant actions is because the lender must have title involved to be sure that there are no hidden liabilities that the lender is incurring by accepting the property in this manner. It should not take that long though so you should stay in contact with the lender and let them know that your resources are such that if they are unable to complete the process soon, you will be forced to just walk, turn everything off and require them to take the home through a foreclosure action instead of Deed in Lieu.
  The lender would prefer the home sooner than later if that is your choice as well (they really would have preferred that you could have completed the sale and paid the loan off). So, if it is possible to speed up the process, they will do what they can while ensuring the title and that all HUD requirements are met.
  Reply to Michael
Deborah Ritchie
September 10th, 2018

My father has a reverse mortgage and we have done everything ask of us and I have been told since the first of June that the paperwork has been sent to the lawyer's but I call weekly and cannot find out what is taking so long. The house is a simple FHA house and has no leins against it so shouldn't 3 plus months be enough time for the lawyer's to do whatever it is they are doing? We are still having to pay the house insurance for a house that the reverse mortgage company has taken over as far as up keep and we have been told that we can no longer enter. I don't understand and I have no idea what to do next.
Reply to Deborah
- Michael Branson
  September 11th, 2018
  
  Hello Deborah,
  
  I think I missed a couple of steps here so let me repeat this as I understand it and hopefully I have everything correct. Dad had a reverse mortgage and he is no longer in the home. You contacted the lender and sometime around the first of June, they informed you that they sent to the Deed in Lieu of Foreclosure paperwork to an attorney for review. Does that sound about right? There are a few things that have to happen that will include title work and I don't know if you live in a state where that is handled by an attorney or a title company. The lender has to conduct a title search to determine that there are no other liens on the home before they can accept a Deed in Lieu of foreclosure. If another lien pops up and they accepted the Deed in Lieu, then they would have to accept the additional encumbrance as well. If there turns out to be another lien, the lender may not be able to accept the Deed in Lieu and may have to conduct a foreclosure process just to protect their lien position free of other encumbrances/liens.
  
  However, this sort of cuts both ways. If they cannot accept the Deed in a timely manner, you can talk to an attorney about possible ramifications if you just walk away from the home and refuse to insure or make any more payments of any kind to the upkeep. I tell you that you should seek legal counsel because you have not only the reverse mortgage but any other possible issues with city, county, HOA (if any), etc. and an attorney can make sure you are not incurring any other liabilities by not doing something. The loan itself is a non-recourse loan meaning the only thing the lender can go after for repayment of the loan is the property itself and if you are already giving that back to the lender, you may not have any further liability. I certainly would not just assume that though and would get some sound legal advice as laws in different areas are different. If the lender has already taken control of the property though and you are not even allowed access to the home any longer, I would be sure to give this information to any attorney with whom you spoke.
  Reply to Michael
Thomas Cunningham
September 1st, 2018

Dad passed away in May 2017 and we notified the reverse mortgage lender. We received one letter advising us of our options. I opted to proceed with deed in lieu of foreclosure. The house is vacant and i have written many letters informing them of status and now as of September 2018 when I call they say they are working on it but no letters are sent to me. I can't get home owners insurance. The city is threatening me that I must keep the landscaping trimmed. I have complied with everything until last month I am not paying the taxes. I have turned off all utilities. What can I do to get them/ HUD to take custodial care and receive the DEED?
Reply to Thomas
- Michael Branson
  September 4th, 2018
  
  Hello Thomas,
  It is not in the lender's or HUD's interest to wait over 12 months to take title to the property as the costs continue to rise for them as well. I can't begin to speculate why the delay is taking place. There could be a lien or some other issue that is preventing the lender from proceeding but I really can't speculate. I would strongly advise that you try to call the servicer and get them to explain the delay and if they are unable or unwilling to tell you what is happening, send a registered letter to HUD directly with the Case Number (located on the loan documents) to them at least outlining your concerns.
  Reply to Michael
Brynn
April 4th, 2018

My dad passed away recently and had a reverse mortgage. It was done before he remarried and his wife's name is not on any of the documents. She is not going to stay in the home. How does she go about "returning" it to the lender? And how long does she have before she has to be out of the house?
Reply to Brynn
- Michael Branson
  April 4th, 2018
  
  Hello Brynn,
  A Deed in Lieu of foreclosure happens when the legal owner of the property executes a Deed to the lender which transfers ownership of the home to the lender immediately. If your father's wife is not on the title to the home, she cannot execute this Deed as she does not own the home.
  If the property is awarded to her through probate, she could execute a Deed to the lender at that time if that was her desire. If your father added her to title at some point after the loan, she may not have to wait for probate, she may have title to the property now.
  Once she relinquishes title to the lender, she would have to make arrangements to vacate the home. If she is not on title or is on title but chooses not to sign the title over to the lender, she has until either the lender completes a foreclosure action which typically takes 4 months or longer after it has begun.
  Remember, she has no ill consequences from the foreclosure, that is filed against the property and the deceased individual who signed the loan documents. The foreclosure action does not affect her or her credit whatsoever since she never promised to repay anything on that loan. She can wait until she is ready to move or until the lender has completed all their necessary notifications and foreclosure procedures before she HAS to do anything.
  The one thing I would really advise though is to check with a local real estate professional to determine the value of the home in comparison to the amount owed on the mortgage. There are times it makes sense to let the lender take the house and worry about its disposal, especially when the new spouse does not want the home, but it just might turn out that there is still equity in the home. If so, why not sell the property and keep the equity?
  I have had several instances where family members contacted me and were ready to let properties go that I gave them this option and in one case even introduced them to a senior real estate specialist in the area who helped them conduct an estate sale through a company with whom they worked, and then sell the home. This was all done from a different state than where the heirs were located which allowed the family to keep over $75,000 after all costs.
  They never even visited the state where the property was located and didn't realize this was possible. There are specialists who work only with families of seniors and estates and I think it always makes sense to check into every option before assuming you have to just give the property back to the bank.
  Reply to Michael
Linda Zwirlein
March 7th, 2018

After my mom passed I found that her home had a reverse mortgage. My question is will my credit be affected if I do a Deed in Lieu? Is a Deed in Lieu better/worse than a foreclosure? Thank you!
Reply to Linda
- Michael Branson
  March 7th, 2018
  
  Hi Linda,
  
  No lender can file an adverse credit report item against you for a loan which you never signed. A Deed In Lieu or even a foreclosure could only be reported against the individual who signed the Note and Deed and promised to make the repayment to the lender -not their heirs. And I stress the would "could" for a reason. Derogatory credit items are reported as a means to provide a method by which creditors can evaluate the payment habits of borrowers. Reverse mortgage borrowers who have passed are no longer potential borrowers and therefore there is no reason to even report these items to any credit bureau, even for those who did sign the Note and Deed. The individuals at reverse mortgage servicing entities with whom I have discussed this topic have confirmed that it would be pointless to report such items and so they do not report the Deed in Lieu to credit bureaus for your mom and they cannot for you.
  Reply to Michael
La rry Holt
February 23rd, 2018

Thank you for the preceeding information.
Reply to La
Jeff
January 20th, 2018

I am just starting the "Deed In Lieu of Foreclosure" process for my father. The mortgage company requested that I get them a "Move Out" letter, since my father has vacated the premises
My question is. does anyone know of a website I can download a template from?
Also I am open to any/all advice.
Jeff
Reply to Jeff
- Michael Branson
  January 23rd, 2018
  
  Hi Jeff,
  
  I think you just need to send them a one or two sentence letter that states something like:
  
  Dad has permanently moved out of the home and the house is no longer occupied. All personal property has been removed and you may take possession of the home immediately.
  
  Doesn't have to be extravagant, you don't need a template and if they do not accept the letter, the only thing it does is delay their ability to mitigate their losses so there is no reason not to move quickly. The loan has no other recourse than the property so they have no reason to delay since they can get nothing more from dad than the home anyway.
  Reply to Michael
Noah Body
May 12th, 2016

No one above has made any mention of the tax consequences to the IRS from doing a DLF......believe me, there are and it's ugly. Unlike people who lost their job and did a short sale, these seniors will get a 1099 from the lender representing mortgage relief. Such mortgage relief is considered income by the IRS. Those seniors lucky enough to be able to apply the tax-free exemption of $250K for single/$500K for married can see this tax liability disappear. But not everyone will be that lucky....
Reply to Noah
Alan Holtz
July 28th, 2015

I too was told it would take about a month once the mortgage company got the request to do a deed in lieu. It seems they would rather delay forever (ive been waiting over two months now and last time I called they said now it could take 100 days!) They said they need to do a title search (which I know only takes a few days at the most). I believe they delay as long as possible so the property goes into disrepair and the former homeowner stops paying all maintenance, electric, and hoa fees, which will delay it even longer; the longer they wait, the more they can claim from the government (they know they cant get anything out of the elderly (or dead) former property owner, but its guaranteed by the government and they can claim and collect all sorts of fees and reimbursement for repairing the place and their legal fees. I am trying to continue paying the electric, maintenance, and condo fees, and insurance as long as I can just because my 86 yr old mom always took care of the place and always paid her bills, etc. I guess they count on people being good like that, but its obvious all they care about is profit, Reverse Mortgages are a rip off from the start and certainly in the end. Everyone should tell whoever they know not to EVER consider a reverse mortgage!
Reply to Alan
- Michael Branson
  August 3rd, 2015
  
  Hi Alan,
  The loan is an FHA-insured loan and the lender has to obtain HUD approval for certain servicing functions. There is no benefit for the servicer to delay accepting the Deed in Lieu of Foreclosure once it is determined that the property is going back to the lender. In fact, the sooner the lender has clear title to the property, the sooner they can put the property on the market and sell it.
  The lender must make an accounting to HUD for every expense. I had worked in the servicing department many years ago and let me assure you, it is not a money making venture to take homes back and try to seek reimbursement for fees. The fees to the lender are actual hard costs and must be completely accounted for before any reimbursements are made by HUD. The man-hours spent on such a procedure far outweigh any reimbursement as the FHA insurance does not pay the lender for the additional costs the lender incurs on its own to dispose of the property.
  However, most borrowers cease to pay the taxes, the HOA, and other costs associated with the property once the decision has been made to grant the property back to the lender. The Reverse Mortgage is a non-recourse loan and therefore the lender can never go back to your mom or her heirs to seek repayment for any costs, their sole security for the loan is the property itself. I can only assume that you have already determined that there is not sufficient equity to sell the home and that is why you have agreed to deed the property back to the lender instead of selling it yourself. So if that is the case and your mom has already vacated the home, why does she have any expenses at all? You can shut the utilities off, stop paying the expenses and sign a deed over to the lender at any time and there is no recourse to your mom or her heirs.
  The Reverse Mortgage program has several safeguards written into the program and you are under no obligation to incur a single expense. I don't know how long your mom was able to live in the home without making a mortgage payment, what the values did during that time, or whether the market has completely recovered where her home is located, but many homeowners received more money than their homes are still currently worth and have still been able to live in the properties for years without making payments and they and their heirs will be able to walk away from the property without owing a dime. I can't comment on your mom's situation, I don't know if she could have stayed, would have had to move, if the downturn in the market values would have wiped out her equity or not, or what. But I do know that the reverse mortgage has helped thousands and thousands of seniors stay in their homes when they would not have been able to otherwise and that includes the first reverse mortgage I ever took part in, the one for my mom that has been the best thing for her!
  Reply to Michael
Carol Boland
July 22nd, 2015

Have the same issue. My mom moved out of her home. Peeped in lieu began processing with promise of no longer than 90 days for processing. It's now 5 months..she is 92 and still paying utilities, insurance, homeowners dues and maintenance. She has not lived there since February. Mortgagee was sold to another company just as we were about to close and now the process starts again. This isn't right. She is 92 and needs the money. Is there any recourse.
Reply to Carol
- Michael Branson
  July 23rd, 2015
  
  Hi Carol,
  I'm not 100% sure I understand what you are asking and don't want to make any assumptions. Firstly, I want to be clear that I am not an attorney and cannot give you legal advice. From what I think you are asking me, it sounds like you are telling me that your mom is already out of a home and has started a Deed in Lieu of foreclosure - that she is in effect giving the property back to the lender. And it sounds like even though she has moved out of the home and is in the process of giving the home back to the lender, she is still paying for costs of the home while the lender is delaying the transfer of the ownership. Is that all correct?
  The only advice I can give you is to seek legal counsel and if your mom cannot afford an attorney, there are many free legal outlets available to seniors. I would think that they will tell her just to turn off the utilities, cancel the insurance, sign the Deed which conveys the title to the lender and stop making any further payments! I would think that they will advise her that at 92 she will not have to consider her credit for future home purchases and that since the reverse mortgage is a non-recourse loan, that she should sever the relationship with the bank and stop any further financial involvement with the property immediately. But again, you really should seek their counsel because I do not know if there are any other ramifications that she needs to consider with the HOA, etc. I would think their recourse would also be to lien the property for any unpaid dues (that she will no longer have an interest in anyway), but I cannot make that assertion and that's why it would be best to seek competent counsel in the state in which the property is located.
  I would speak with someone as soon as possible. If it is as I believe, your mom could cease all payments immediately without any negative ramifications over and above losing the property and if she is already deeding the property back, seems to me she should stop the costs sooner rather than later. You may find that today is the first day of no more costs!
  Reply to Michael

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See What Your Home Could Do for You

How a Reverse Mortgage Deed in Lieu of Foreclosure Works

The Reverse Mortgage Is a Non-Recourse Loan

Stability and Protection

Top FAQs

What is a deed in lieu of foreclosure in a reverse mortgage?

Why is a deed in lieu better than foreclosure?

What is the most significant disadvantage of a lender of a deed in lieu of foreclosure?

Can a lender foreclose on a reverse mortgage?

How long does a foreclosure on a reverse mortgage take?

Have a Question About Reverse Mortgages?

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