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Reverse Mortgage Conservatorship

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Your reverse mortgage questions are answered by All Reverse Mortgage, Inc. CEO & industry expert Michael G. Branson, with over 40 years of experience in the mortgage banking industry.

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Question From Doyle W. on 7/12/2020
My parents had a reverse mortgage loan and at the time of the loan they were both Incompetent. The loan was taken out in 2015 my mother was diagnosed with Alzheimer’s in 1990 And My dad was Diagnosed with COPD in 2000. What can I do I need to do?
Expert Answer

Hello Doyle,

Borrowers lacking competency can still get a reverse mortgage utilizing a properly executed Power of Attorney that meets HUD requirements.  They can also use a court ordered conservatorship if neither retains competency and the court assigns a conservator.  

I am not a physician and do not know all the ramifications of COPD but my understanding is that while it is a difficult lung disorder, I’m not aware of the illness rendering patients incompetent to direct their affairs as is the case with Alzheimer’s.  

If your father was mentally competent and had Power of Attorney for mom or another individual had Power of Attorney (POA) for one or both, the loan could have been closed legally with the person retaining the POA attending the counseling and signing the loan documents.

I would suggest you look at your parent’s paperwork if you are able to locate it and see how the loan was closed.  If dad acted as mom’s POA under a validly signed POA (one that she signed before her doctors determined she was no longer capable of understanding and directing her own affairs), the loan was closed in accordance with the law and HUD requirements. 

If you can’t find their paperwork, you may need to contact an attorney to determine the next step you need to take because unless the borrowers have already given the lender authorization to work with you, the lender cannot by law, divulge any information to a third party about the loan.

It could be that you need to apply for a conservatorship if dad is not competent now, but your attorney would need to advise you in that regard.  If dad is still competent but just ill from the COPD, he can still sign an authorization for you to work with the lender and they with you on all things concerning the loan.  

Once the lender has verification of the conservatorship (the legal right for you to work on behalf of your parents) or the signed authorization from dad, they can work with you and provide you information on the loan.  I would really encourage you to see if you can find their original paperwork as that would be the fastest and least expensive way to determine how the loan was closed.

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Question From Judy B. on 1/20/2019
My sister and I recently gained Conservatorship and Guardianship of our 79 yr old mother who was diagnosed with Dementia. She had applied and received a Reverse Mortgage prior to all the Court Proceedings. She took out about $50K, paid a few bills and deposited the remainder of the funds in her Edward Jones Account. After all this happened, we were awarded Conservatorship. The situation now is--she lives in Kentucky, I live in Tennessee and my sister lives in Florida. Reverse Mortgage statements continue going to her address along with Withdrawal Coupons. We are afraid she is going to withdraw another large amount from her RM account and spend it frivolously before we get a chance to straighten out everything with the RM co. She has gotten herself in tremendous debt over the years and we are trying to clean up her mess. I have faxed a copy of the court ordered documents to the Reverse Mortgage Company showing we have permanent Conservatorship over our mother. I guess my question is if my mom sent a coupon request in to the company, would they honor it and send her the money despite having a faxed letter on hand stating not to distribute any more money to her and having copies of the court order.
Expert Answer

Hi Judy,

They should not, but I would not leave it to chance!  Have you spoken with the company yourself and verified the receipt of your information and right to conduct business on your mom’s behalf?  I would also send a registered letter to the company with signed receipt required giving them legal notice of your court appointed duties and putting them on notice that they are not to disburse any funds whatsoever without your express consent.  The withdrawal form is one that is automatically included and goes with every statement, but I would not take any chances and would make sure I had the documentation.

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Question From Leticia S. on 8/21/2018
How to get conservertership on someone with severe dementia to obtain a reverse mortgage to pay for home care husband is fine wife has dementia.
Expert Answer

Hello Leticia,

It has to be done through the court.  I would suggest that you contact an elder care attorney and they can walk you through the process and give you an estimated timeframe for the courts in the area where the case would have to be heard.  Just remember that the person requesting the conservatorship should also ask for the specific right to apply for a reverse mortgage while in court as that will be needed for the loan when a conservatorship is being utilized.

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Question From Ruth G on 1/30/2018
I am a co-borrower on a reverse mortgage. The property is split in two lots with one lot having my husband's name & his deceased wife's name on that lot. My name and my husband's name is on the lot with the house but both lots are on the reverse mortgage. My husband had an old will from when his 1st wife was alive that his kids have tried to push through probate to gain executorship. My husband said he had a new will, naming me as executor, but gave a copy to one of his children for safe keeping and now it is non existent. I do not know what lawyer he was using at the time. I have found a partial document on his computer & a hand written note, naming executor. I have been in court trying be named executor. What are my options regarding the reverse mortgage? His children want to take the house from me.
Expert Answer

Hello Ruth,

I am not an attorney and therefore not allowed to give legal advice.  I would strongly recommend that you obtain competent legal representation as this sounds extremely unusual to me.  As a lender, I can tell you that we cannot put a reverse mortgage loan on two parcels, especially one that has another individual’s name on it other than our borrowers.  I would find it extremely unlikely that a lender would cross-collateralize more than one parcel with a reverse mortgage and especially so if the second parcel had a different individual’s name on it as that would create a cloud on title.  Talk to an attorney and let him/her tell you for sure.

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Question From Clifton on 12/29/2017
Wife diagnosed with Alheimers. Went to Atty immediately and got DPA. Seven years later, now told DPA no good, need conservatorship. Need money to care for wife but can't get any out of the house and can't sell it as it is in Trust and they won't believe DPA. ????
Expert Answer

Good Afternoon,

Unfortunately that is one of the areas that we  do run into more than we would like to.  HUD cannot afford to have the mortgage challenged by family members years later saying that the borrower was not competent to sign the power of attorney and therefore the loan should be ruled invalid and that is why their rules for the use of powers of attorney and with incapacitated borrowers are what they are.  As you yourself just stated, you didn’t get the Power of Attorney until AFTER your wife was diagnosed with Alzheimer’s Disease and therefore, the Power of Attorney itself may be subject to challenge as to its validity if any family members were so inclined at any time in the future.

Have you looked into the conservatorship?  I know it is more time consuming and will cost some money to complete but it is an option and probably the best one at this time.  Your attorney can tell you how the process would work and probably handle the entire procedure for you if this is what you feel is best.  And I know it is late to say this now in your case, but this is why I personally have told all family members to be sure to have not only a will but trusts and POA’s completed long before you ever think you will need one.  As you are now finding out, if you wait until after a diagnosis of illness or an accident that impairs the mental capacity, then the POA may not be accepted as valid since there is no way to ascertain whether or not the individual actually had the capacity to know the full implication of the document they were signing at the time, thereby making it invalid.  

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