Reverse Mortgage Conservatorship

Hello Ledra,

I am afraid I really can’t answer this question.  I don’t know what “this” is when you ask how you protect yourself and your sister so “this” doesn’t happen again.  If you are referring to her taking out a loan against the property, you really need to speak with an attorney to determine the best way to accomplish your goals. 

I don’t know if just having you file a loan/lien against the property when you pay off the other loan would be sufficient is that is your goal because while that would put you in first lien position and may protect the money you put into the place to pay off your sister’s current loan, I don’t think it would necessarily stop any future lenders or creditors from placing other liens on the property behind your lien. 

I don’t know if putting you on title with your sister would resolve your issues or not, but it would certainly be something you could discuss with your attorney.  I do know that your sister would need to be on board with any of these options as she would need to sign any legal documents necessary to either transfer the title or to create the new lien. 

Hello Khristopher,

I am not sure by the question I fully understand what you are asking so to let me spell it out and hope I answer your question.  If the conservator or guardian is the spouse of the borrower and was the spouse at the time the loan was closed, then that spouse will qualify under HUD’s eligible non-borrowing spouse guidelines if that spouse also lives, and has always lived, in the home. 

In that case, the spouse/conservator could remain in the home under a deferment of the due provisions of the loan.  HUD just recently changed their guidelines to include previously non-eligible spouses as long as they meet these requirements (and they continue to live in the home and pay the taxes, insurance and all other property charges as due). 

If however you are not the spouse of the borrower or were not the spouse at the time the loan was closed, then you would not be eligible for deferment of the borrower’s requirement to repay the loan when the borrower left the property and permanently moved to a nursing home. 

At that time the loan would become due and payable, and it would be up to your court approved duties to determine if you could refinance the loan to keep the home or if the home would need to be sold at that time to repay the reverse mortgage. 

I can’t advise you, but it may even take specific court orders to complete any of the needed actions depending on what the current conservatorship/guardianship papers from the court grant you authority to do.

Hello Susan,

I am sorry, but I cannot give you a definitive answer with the information given here.  We are not attorneys and cannot give legal advice.  I don’t know the code sections you cite or for what state or federal civil codes.  I can only assume that if you mention probate codes, that there is also effect of an individual who has passed and not just the individual for whom you hold conservatorship but I don’t know that for certain or how that fits into it either. 

Typically, once you have already established a court-ordered conservatorship, you can do whatever the conservatorship grants you the powers to do but I would tell you that without even knowing what state this is from, a lender would need to get the actual documents and have them reviewed by their legal staff to determine if they were sufficient as is or if there would need to be any further approvals granted based on their review. 

Hello Deborah,

All parties on title must consent to a new loan.  There are several ways the loan may be completed, especially if the son is also living in the home, but it will take the cooperation of each individual on title.

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.

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.

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.

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.

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.