Hello ARLO, 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… 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!

How Does a Reverse Mortgage Deed in Lieu of Foreclosure Work?

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 decide 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 downturn 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 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 could live in their homes for 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 did not 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 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 will not even need the assistance of an attorney.

Top FAQs


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

A Deed in Lieu of Foreclosure is when the owner of a property signs the title of the property 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 deed in lieu of better than foreclosure?

The reason borrowers or heirs sometimes choose to sign a Deed to the lender in lieu of foreclosure is 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 and therefore, borrowers and their heirs can often greatly 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 the home or sell it, 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 either.

What is the biggest 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 is free of all other encumbrances and liens and is 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 must have all personal items removed with 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, the borrower could 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 maintaining the home in a reasonable manner. 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 properly 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 can 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 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 though is that a reverse mortgage 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 and clock is ticking (as is the case with any foreclosure action).

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