How a Reverse Mortgage Deed in Lieu of Foreclosure Works
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!
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?
Why is deed in lieu of better than foreclosure?
What is the biggest 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?
ARLO recommends these helpful resources:
February 11th, 2023
February 11th, 2023
September 18th, 2022
September 18th, 2022
August 30th, 2022
August 30th, 2022
June 10th, 2022
June 10th, 2022
May 23rd, 2022
May 23rd, 2022
November 6th, 2021
November 17th, 2021
September 8th, 2021
September 22nd, 2021
February 15th, 2021
February 15th, 2021
January 13th, 2021
January 13th, 2021
December 28th, 2020
December 28th, 2020
November 11th, 2020
November 11th, 2020
September 8th, 2020
September 8th, 2020
August 14th, 2020
August 14th, 2020
July 7th, 2020
July 7th, 2020
June 29th, 2020
June 29th, 2020
January 29th, 2020
January 29th, 2020
April 10th, 2020
April 13th, 2020
October 20th, 2019
October 23rd, 2019
September 4th, 2019
September 4th, 2019
August 15th, 2019
August 15th, 2019
July 25th, 2019
July 29th, 2019
June 29th, 2019
June 29th, 2019
January 21st, 2019
January 22nd, 2019
January 16th, 2019
January 16th, 2019
September 10th, 2018
September 11th, 2018
September 1st, 2018
September 4th, 2018
April 4th, 2018
April 4th, 2018
March 7th, 2018
March 7th, 2018
February 23rd, 2018
January 20th, 2018
January 23rd, 2018
May 12th, 2016
July 28th, 2015
August 3rd, 2015
July 22nd, 2015
July 23rd, 2015