My mom procured a reverse mortgage when property values were high, in 2005. 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… I want to do a whistle-blower with Clark Howard showing people the cons of procuring one of these loans, in a failed economy. This is just not fair. My mom is 91 years old and I feel will have serious physical health problems over this… How do I get them to listen and respond!!!!
The reverse mortgage is a non-recourse loan
If your mom can no longer live in the property, she can move out at any time and simply notify the servicer (you have their address and phone number if you are getting the statements and other correspondence) that she has vacated the property.
She can sell the home or simply let them make arrangements to take the home back at that time.
If there is no equity in the home, then I would assume she would allow them to take the home if you or any other heirs do not want to keep the home at a payoff of 95% of the current market value.
They would arrange to take the home either by Deed in Lieu or through foreclosure but Deed in Lieu is much better for the lender as well.
The down turn in the economy eroded the equity all borrowers had in their homes, not just the borrowers who had reverse mortgages.
We have seen borrowers who borrowed more in 2005 – 2007 than their homes are still worth today.
That does not make the loan a bad loan – those borrowers received more money than their house is currently worth and were allowed to live in their homes for 7 – 9 years without having to make a single payment and now that the loan is higher than the current value of the home, they are not required to pay one cent over the current value toward the payoff of the loan.
In other words, the insurance that they paid for to HUD allowed them to receive more money than the home is currently worth, pay no interest on the money and have no recourse on other funds to them or their heirs when they move AND they were able to live in the property for years while under no burden of mortgage payments.
Borrowers with regular or forward loans were not so lucky
Many of them paid interest on loans that were well above the current value of the homes when the values dropped and some paid until they could not pay any longer and then they had no home to live in anymore and no money to start over.
Your mom was guaranteed a home to live in for as long as she wanted/could and didn’t have to pay any monthly payments for the entire time she lived there (just her taxes and insurance).
Many times those forward borrowers found themselves with no place to live and no money because they were struggling to make mortgage payments during that time. Your mom has made no payments on her loan for the last 9 years.
Please forgive me; I am not insensitive to your mom’s situation.
It just was not the reverse mortgage’s fault that the entire economy fell apart and that property values plummeted.
I guess I just look at it a different way, thank goodness mom had a reverse mortgage and not a forward mortgage that may have required her to lose the home earlier without the protections that she has had.
As for the current situation, your mom does not need to worry about anything.
She can move out at her leisure (another advantage of the reverse mortgage) and then once she is out and you have moved all of her belongings if none of the other family members want the home, simply call the servicer and tell them she is out.
They will move to take the property back and you won’t even need the assistance of an attorney.