Hello Alanna, Firstly, let me express my sincerest regret for what your aunt has had to go through. I wish no one had to endure such hardships but maybe I can help make some sense of things and put some of your fears to rest. I suspect that the balance being added to the loan monthly included the interest accrual, the $300 she was drawing each month and the mortgage insurance but her monthly statement should break all that down for you. Depending on how long the loan has been in place and how large the balance is, it is not unreasonable to assume that she could accrue $700 per month in interest and mortgage insurance costs, especially in our current environment of rising interest rates and considering how much they have risen recently. As far as your concerns about the loan amount and her signing paperwork for additional draws (money), they apparently did sign for a loan program that would give them a monthly payment of $300 per month which leads me to believe they either opted for one of the programs that allowed for a payment for life or for a specified period of time when they closed the loan. How much that payment would be and how long they received it would be dependent on their ages, the property value and whether or not they had a loan on the home at that time that needed to be repaid (and that also could determine why the reverse mortgage balance is what it is today - it could have started by paying off an existing loan at that time so that they no longer had a mortgage payment). We also do not know from this information if they took an initial draw from the loan to do home improvements when they first closed the loan, etc. What we do know is that your aunt and uncle (while he was also alive) were able to live in the home mortgage payment free for however long they had the loan (or she did, you did not specifically state if they got the loan before he passed or if she did afterwards). But the fact remains that either she or both of them lived in the home for the term of the mortgage without having to make a mortgage payment and she was receiving a monthly payment of $300 to help her with her expenses for that time (and it sounds like since 2005 or 17 years so quite a while). I am sorry that she feels too heartbroken to rebuild, but if her insurance is sufficient, and it should be, she can rebuild and return to the home and continue to live in the property, still making no payments on the loan for as long as she lives. It doesn't make any difference how upside down the loan balance is compared to the value of the home. She would need to communicate with the servicer to determine how best to accomplish this. However, if she feels that she absolutely cannot return to the home after this event, she can walk away from the property and the only recourse for the lender is to foreclose on the home. They cannot seek any additional funds from your aunt. The insurance will pay to the lender to rebuild the home and then any shortfall between the loan balance and what the home will bring when sold will be covered by the Mortgage Insurance that your aunt has been paying for. The lender cannot seek repayment from any other assets that your aunt may have either. The loan is non-recourse so that means that the only security they can look to in the event of default is the property. The insurance that covers the dwelling will be paid to the lender as the lienholder if your aunt chooses to abandon the home but as I said, that will go toward rebuilding the property whether she stays or leaves. I hope this makes things a little clearer and helps ease your mind.

Hello, Certainly, things you need to consider. If the home is not habitable for more than a year, the lender may call the loan due and payable which would mean that you could be required to repay the loan. If the home were in the process of repair, HUD and the lender are more interested in you returning to the home but if it is still uninhabitable and the rebuild is not substantially underway after a full year, there could be serious questions about whether the home would ever be rebuilt. Under that scenario, you could be looking at a loan that could be called due and payable if at some point it was deemed that the property was a total loss. And that leaves us with the second question. In the event of a total loss that could not be rebuilt, the loan would be repaid but the lender would not receive any funds above and beyond the amount owed on the loan. However, the lender does not require insurance that exceeds that loan amount and most borrowers only insure for the loan amount or replacement cost of the improvements. In California especially, a good percentage of the value is often in the land. Most insurance will not pay you for losses on this portion of the value so there may not be any proceeds available after paying on a claim to replace the home. You would need to discuss that with your insurance agent.

Hello Dennis, The lender is going to protect their interest in the property by making sure that any damage to the home that is covered by insurance over a certain threshold is completed before they will release funds and then the manor of the release is covered in your loan documents. Lenders will not just sign large checks over to homeowners so that they can take off with the repairs uncompleted and leave lenders with a damaged home. If you are saying that you already paid for the repairs, they will probably need to see the cancelled check and have the home inspected and then they should sign off the check for you to do with as you please. If you are saying you do not want to complete the repairs and would rather use them for another purpose, this would not be allowed, even to pay down the balance on the loan as the lender could not guarantee that once the lender signed off their interest in the repair check, that is what the proceeds would be used for, or that the lender's interest in the property is adequately protected (i.e. the value is not adversely affected) if the repairs are not completed.