We have just read with interest the benefits of reverse mortgage to an applicant on your website. You also mention benefits to the Condo Associations. However, our experience as an Association in Florida has been negative. We have recently had a problem in our condominium unit in Boca Raton, Florida, and thought with your experience you might have some insight. We can certainly see the benefits to the person obtaining the reverse mortgage but have certainly seen the negative results to our community as a person is deceased and the procedures that have followed: Owner had a very substantial reverse mortgage for years. Owner died Bank did not take title (hear they do not have to) We (Association) were never advised of the bid price they were selling for or who bought the unit, even though our rules and regulations and docs require that we are to be made aware first of any sale. We had several interested parties within the Association, yet the Band offered Transparency in this whole procedure. The Board was not advised as to the terms of the sale, and to date do not know the sales price. However, the new owners are being very vocal with their demands. The unit has been sold by the bank and we had no information before closure. The new owner is fighting paying current dues and some costs assessed to the unit, and supposedly the bank is not responsible as they never took title but were able to transfer the title. Therefore, it appears we (remaining Condo owners) are likely to suffer financially paying costs that we feel we should not have to assume. It appears very unfair. Are folks made aware of this as they sign up for these approvals and allow these types of reverse mortgages. We appreciate any thoughts on this. -George
The reverse mortgage is a loan, just like any other loan. The lender has no additional and no less influence on the association than any other lender would have. I am a little perplexed by your situation. The benefits we describe obviously for the borrower and for the association for HUD approval pertain to an increased market for all owners when it comes to time of sale. If the condo project is approved, it opens the project up to a larger potential market for all unit owners, not just the reverse mortgage holder.
Now about the title, the bank cannot sell anything they do not own. The lender or HUD either took title through a foreclosure sale, through a Deed in Lieu of Foreclosure if the borrower or the heirs didn’t want the unit and they deeded the home to the lender. Or the heirs who inherited the property could have sold it themselves if the lender/HUD never took title.
But the lender can’t sell something they don’t own so when you say you understand they don’t have to take title, I would suggest that you check with the county recorder to see the chain of title to see how it passed. I don’t know who told you a lender does not have to take title to sell a home, but I have never seen that take place and quite frankly, don’t know how they could possibly do it.
Your situation with the advance notice of any sale price is somewhat unique. I cannot comment on that portion of the transaction because I do not know what the association rules state or the legal enforceability of that rule is. Remember, sometimes people put things in their CC&R’s or other contracts that they want but later find out is not even legally enforceable. That’s why there is usually a severability clause in most CC&R’s and contracts that states that if one clause is found to be unenforceable or not legal, the rest of the document is still valid and enforceable.
If in fact you have a covenant/rule in place that someone didn’t follow (lender/heir/new buyer/real estate agent that handled the transaction), I could not begin to comment on whether or not the clause is enforceable, whether it is or is not, who may be at fault or what remedy you have at this point. That would be a question for a real estate attorney in your area and I would suggest you seek professional legal advice at this time.
My suggestion is for you to sit down with a real estate attorney and discuss all of this. The sale, the first right of refusal or prior notice of sale price in your CC&R’s and what your legal remedies are if they violated any provisions that are legally enforceable. But this problem is not a problem that is directly linked to a reverse mortgage but to a sale of a unit as it relates to your requirements. If there are actual violations here, whether the person/persons violating your rules and regulations turns out to be a lender, an heir, the new buyer (and the buyer’s unwillingness to comply with the CC&R’s now) or all the above, it’s not the lending instrument (reverse mortgage) that was the cause.
If a lender sold a home without following your rules, another lender could do the same thing with any other loan if they foreclosed (whether for default, death of the owner or any other reason), it doesn’t have to be a reverse mortgage, it could be a regular forward lender or a bank with a HELOC or any private lender. And if the buyer is not acting in accordance with the established CC&R’s, By-laws, assessments, etc., the attorney will advise what legal remedy you must force them to comply.
I wish you the best!