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Reverse Mortgage Trusts

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Answered By Our Experts

Question From Dave on 10/12/2018

Do all irrevocable trust go through a legal review?

Expert Answer

Hello Dave,

All Trusts go through a legal review, whether they are revocable or irrevocable.  The only way to determine that they are no disqualifying terms in the trust are to have them reviewed by an attorney for compliance.

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Question From Cathy on 10/11/2018

What benefit is there in having a reverse mortgage home in a trust?

Expert Answer

Hello Cathy,

This is a question for your family financial advisor.  The act of putting a property in a trust is one to consider based on your family’s goals and does not affect the reverse mortgage.  There is no benefit or harm to the loan to have the property in your trust but there may be other considerations that you should discuss with your family and your attorney.  The loan still becomes due and payable when the borrower passes or permanently leaves the home so it does not affect that provision of the loan.  It may however make it easier on the families if the owner already has all their wishes drawn out and the fact that since the title is in the name of the trust and the trust itself does not die, the heirs can move more swiftly when needed.  However, those are all conversations to have with your trust attorney.

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Question From Linda I. on 10/05/2018

My parent's home was in the revocable living trust, however, when they applied and were approved for a reverse mortgage, the home was removed from the trust. Do the heirs need a will and probate to resolve the reverse mortgage?

Expert Answer

Hi Linda,

I would first ask you if you are at a time when this is now an issue or are you asking for future reference?  The reason I ask is because unless the terms of the trust were totally out of HUD’s acceptable parameters (and most are not), there is no reason they should have had to take the home out of the trust.  It is possible that there are terms that would preclude the trust from being acceptable but if your parents have not passed yet, I would suggest that you have the trust reviewed again at this time by the servicing agent and if it meets HUD requirements, you can move the title back into the trust before it becomes an issue.

Having said that, there is a good possibility that if the borrowers have passed, the title cannot now be transferred to heirs without going through probate.  The mortgage company can only work with the borrower(s) while the borrowers are alive or an individual that the borrower(s) has/have granted power of attorney or the new property owner once the probate is completed after they have passed if the property is not owned by the trust and for good reason.

The lender cannot be responsible to determine who the new owner will be.  If the lender agreed to work with one relative claiming to be the sole heir and the property had not gone through the court probation and a new relative popped up right afterward claiming that he or she was the true heir, then the lender could be liable for making a false determination.  You don’t need to present a will to the lender, but the probate will mean that the case has gone through a court and the court has determined who the heirs actually are and that is the only way the lender can be sure they have no liability from others making the same claim later.

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Question From Barbara J. on 9/28/2018

I am an heir to my mother's property, and not enough money in the trust to pay my sibling what the trust says, can the executor force a reverse mortgage on me without my permission?

Expert Answer

Hello Barbara,

No one can force you to take any mortgage to which you do not agree.  The lender will not complete a loan for you if you do not apply for and qualify the loan, then agree to the terms of the loan by signing the legal documents.  Now that is not legal advice, that is the information from a lender letting you know we and no other entity can force you to enter into a binding loan contract against your will. 

But now let’s talk about the other 900 pound gorilla in the room.  While no one can force you to take a loan that you do not wish to take, I cannot tell you what options are and are not available to you with regard to distribution of assets and what the executor has the right to do or not do if there is not sufficient money to make all payments.  I take it you are to receive a property and your sibling is to receive cash but if there is not sufficient cash, I don’t know if the executor then has the authority to sell the home in order to keep things equal between you and your sibling.

I strongly suggest that you contact an estate attorney to determine your rights, obligations and to help mediate a possible solution.  If there is not sufficient funds to make payments to all parties in accordance with the trust provisions, the attorney can tell you what alternatives you have and also what risks you might run if you don’t do certain things to liquidate trust assets.  We could not possibly advise you in this matter but maybe even the attorney who set up the trust in the first place can assist you with your questions.

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Question From Aileen M. on 9/18/2018

My grandmother has a revocable trust left by my Grandfather. She made my husband her poa, trustee of the trust in its entirety, and grantor. She took a reverse mtg out on the house and has recently passed away. A family member would like to purchase the house but is this possible being that it is in the trust with a reverse mtg? Could my husband sell her the house directly for just the loan amount and what about the beneficiaries if the house is part of the trust?

Expert Answer

Hello Aileen,

The reverse mortgage is just a loan on the home.  The loan against the property does not affect the rights or obligations of parties to the trust.  To determine those rights obligations, you really should have a trust attorney review the trust and advise your husband.  This might be particularly advisable as in some states, subsequent trustees may have duties and liability to other heirs. 

In some cases, the trust itself contains provisions for the trust to pay legal fees incurred by the trustee to administer the trust so you can check to see if this trust has such a provision.  If it is convenient, you may even want to use the same attorney(s) that drafted the trust, but that is entirely up to you.  In any event, these are all legal questions that an attorney needs to answer for you and not a lender.

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Question From Bev on 9/18/2018

Can a trustee of a irrevocable special needs trust take out a reverse mortgage?

Expert Answer

Hi Bev,

That all depends on the trust itself, title company requirements, the state in which the property is located and your other qualifications.  Since the trust is irrevocable, the chances are that you cannot make changes or move assets into or out of the trust at this time and in a state like Texas, you probably would not be able to complete the loan based on the laws in the state.

In those states where the state laws do not present issues, the trust would still have to meet all of HUD’s requirements, as is without any possibility of changes due to the irrevocable nature of the trust, in order for you to receive the loan.  In addition to the trust needing to meet HUD’s requirements, you would also need to  meet HUD’s borrower parameters which include minimum age of 62, income and credit as established by the financial assessment guidelines and all property requirements.

If you meet HUD’s requirements (age, income, credit, etc), then you could have the trust reviewed to make that determination prior to moving forward.  At least that way you could save the expense of the appraisal if there was no possibility for approval.  Unfortunately, you would have to complete the counseling as there is a cost to have the trust go through a legal review and you could incur no costs until you had received your counseling certificate.

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Question From Denise on 8/30/2018

Do I have to give a copy of my moms revocable trust to a reverse mortgage company when applying for this loan?

Expert Answer

Hello Denise,

If the loan is to be in the name of the trust, then yes, you would have to supply the trust to be reviewed.  If the property is not in the trust and the loan is to be to individuals, not to the trust, then no, the trust would not have to be reviewed to verify that it meets all the proper requirements. 

Most trusts are written so that they conform to HUD guidelines but every once in a while, we find that the that a property with the title vested in a trust and the terms of the trust do not meet the requirements.  In other words, there are terms in the trust that are not acceptable for the loan.  Such an example would be if there are other beneficiaries of the trust that do not live in the property and do not meet HUD requirements for the program.  We have also seen some trusts that only give the borrower a life estate in the home for the life of another individual and that would not be acceptable.  For these reasons, every time a property is vested in the name of a trust, that trust must go through a legal review as that is the only way to determine that the terms of the trust are acceptable for the loan.

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Question From Zayla on 8/27/2018

My grandfather put the property in a trust to go to my father and then myself (to the best of my knowledge). After my father inherited the property he took out a reverse mortgage and removed me as the beneficiary and hasn't discussed the situation and we've since become estranged. How can I find out what the status is of this scenario and if I will in fact inherit the property (with requirement to pay reverse mortgage loan) or if someone else will be beneficiary?

Expert Answer

Hello Zayla,

I am afraid I really can’t help you a lot on this.  This issue doesn’t have anything to do with the reverse mortgage but really concerns property rights and trusts.  The answers will probably depend on what kind of a trust your grandfather established at the start.

If he established a trust whereby your father became the beneficiary of the trust (the owner of the home) upon his passing and you were a party named secondarily in case your father predeceased you, it could be that the property passed entirely to your father by virtue of his standing in the trust and your father may then have had full rights to change the trust once he is the beneficiary and the trustee.  It could have been a revocable or irrevocable trust but your father may or may not have the ability to rewrite the terms at this time.

If you know who your grandfather’s attorney was who originally helped him establish the trust, you may be able to contact him/her and ask for advice.  You may have to just contact another trust attorney to determine if there are any legal channels you can follow.  All I can tell you for sure is that this has nothing to do with the mortgage and unfortunately, we cannot advise you on legal matters.

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Question From Lisa G. on 8/20/2018

My mother has a home with my step dad. The will states if she dies first he gets to live in the home as long as he wants but when he dies or decides to sell the home is to be split between her husband and two children. My question is, if she passes first can he set up a reverse mortgage against the wishes of the children which are co-beneficiaries?

Expert Answer

Hi Lisa,

I can’t answer this for you, it is a legal question and one that might not have the same answer in all parts of the country I would wager.  For instance, states like Texas have very strong heirship laws and might have a different answer than a state that puts more emphasis on their marital status.  At any rate, this question deals with your and his legal rights, not the reverse mortgage itself.  I would suggest that you all discuss the issue before mom passes so that you can also discuss a solution.

I don’t know if your step-father is currently on title or not which may make a big difference on what can and cannot be done at this time.  Perhaps mom should consider a trust at this time if she is the sole owner as an attorney can set up the terms of the trust so that the parties’ rights are all completely spelled out upon her passing.  At any rate, this is definitely a question to ask of a qualified estate attorney in the area where the property is located.

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Question From ALMA on 7/24/2018

I added property with an existing reverse mortgage to a revocable trust but did not review the trust document with the lender before I transferred the property to the trust and filed the quitclaim deed. I have lost the living trust document. Can the loan be called due and payable or is the Living Trust void?

Expert Answer

Hello Alma,

You do need to send the lender a copy of the trust for approval.  The loan documents allow the lender to call the Note due and payable in the case of a transfer of title and that’s exactly what you did.  However, if the trust can be approved, they will not and all will be fine.  If you cannot find your copy of the trust, contact the attorney you used to draw it up.

The problem is that the unauthorized transfer of the title to the trust will not “void” the trust in any way, but your title change, unless approved by the reverse mortgage lender, will violate the terms of the legal documents of the loan.  That is cause for the lender to call the loan due and payable which would lead to foreclosure if you were unable to pay off the balance.  

You really need to find the trust documents because I think they would be needed now even to remove the property from the trust.  Title companies need to be sure who has the right under the trust (the current owner of the property) to do the change in title in order to insure your title.  Without having the trust to review, it may be impossible to determine that you still have the authority to take the house back out of the trust and that you didn’t give up this right with the change of title.

This might also create problems for you without a copy of the trust since the title change has already been done.  I would strongly suggest that you contact a trust attorney to get a copy of the existing trust if at all possible and if so, send to the lender for approval.  The lender may require some addendum(s) to the trust but the attorney can handle that for you.

If you absolutely cannot find the attorney who created the original trust and cannot find the trust itself, perhaps the attorney can advise you on a new trust to replace the original and what would be needed to correct the title to the new trust?   I can’t advise you there, but I am sure the attorney would be able to do so and as long as you had it all sorted out before you send it to the lender, you should be fine.

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Question From Arman on 7/23/2018

My mother's house is in an irrevocable trust with me, the oldest son, as the trustee and the remaining children as the beneficiaries. She's the grantor of the trust and the only inhabitant of the house. Is there a lender that will provide us a reverse mortgage in this scenario?

Expert Answer

Hello Arman,

You actually have a couple of issues that will prevent a lender from being able to do the loan in the trust as it is currently structured.  I am not aware of any lender who would be able to grant the reverse mortgage under the scenario you describe for a HUD Home Equity Conversion Mortgage or proprietary or private reverse mortgage.   

It would meet HUD requirements if the children were the trustees of the trust, but only if mom is the sole beneficiary of the trust.  Mom has to be the sole beneficiary when the loan is closed or the trust is not acceptable to HUD.  And since the trust is nonrevocable, I don’t believe you can make the changes to the trust at this time.

There may be a way to remove the property from the trust, that is take the house out of the trust and do the home with mom being a sole owner, but your attorney would have to tell you is this is possible or advisable.  Even if the assets of the trust are such that the home is only a small portion of the overall trust and this seems like a viable alternative, there may be other tax ramifications for doing this so you would want to be sure you had gotten adequate legal and tax advice before contemplating such a move.

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Question From David E. on 7/13/2018

Can a person do a reverse mortgage on a house that's in a will?

Expert Answer

Hi David,

I’m not really sure what you mean by “a house that’s in a will”.  If you are referring to a home that you acquired through a will or inheritance, absolutely.  As long as you now own the home and are occupying the home as your principal residence, you can use the home to obtain a reverse mortgage.  If you mean that the home is yours but you have it in your will to go to someone else upon your death, again, yes, you can use the home as your collateral for the loan and the heir would receive the home and the loan would be due and payable at that time you permanently leave the home.  If you mean that you don’t own the home but are able to stay in it as the result of a provision of someone’s will but the property is actually owned by another party, then no, you would not be eligible for the loan as you are not the owner of the property.  There are certain life estates that also meet HUD requirements and therefore allow borrowers to obtain reverse mortgages but for that, you would need to have the particular estate reviewed to determine whether or not it would be acceptable.

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Question From Marcy on 7/08/2018

Mom has reverse mtg., mom dies, adult son lives in home and never paid rent, won't move out to sell home...Does son have rights to stay and prolong to possibly foreclose which would suck...or can I start eviction proceedings (even if he doesn't pay rent...only food for himself) The trust pays all utilities...What are my rights and his rights? I am his sister, P.O.A. and am The Successor Trustee with a reverse mtg. on my hands....want to sell myself with agent, not foreclose!

Expert Answer

Hi Marcy,

Unfortunately, I can’t help you with this question.  This is a legal issue and the rights of all parties really don’t depend upon what type of loan is on the property.  As a side note, I do agree with you that it would be a real shame if your brother caused this to go into foreclosure by his actions and the family lost the equity as a result.  I would strongly suggest you contact an attorney to determine the best route to take.  I don’t know what would be your best course of action.  I don’t know if you can legally turn off or quit paying the utilities so that your brother has to make a move or if it is even advisable to do that so you really do need to speak with someone who can advise you of all legal options.

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Question From Lilian A. on 6/15/2018

I have a reverse mortgage can i do a living trust?

Expert Answer

Hi Lillian,

You sure can.  Before you transfer the property into the trust, send a copy to your servicer for approval though.  Most of the trusts created do meet HUD requirements but every once in a while we run into one that does not contain the safeguards that are required and it’s a simple process to have it amended, but you would want to know this before you did any transfer of title.  You can easily record the Deed to move your property into the trust once the servicer has approved it and you don’t have to worry about running the risk of issues with your lender if the initial version of the trust does not contain the correct wording to avoid a due on sale provision or duplicate fees for extra recordings.

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Question From Bonnie on 5/24/2018

My mother had a reverse mortgage, she died. She had a trust with her children's names on it. The mortgage company offered it to anyone of her children. One child wanted to pay the debt, do the other family members need to sign a quick claim to let him have the property, before they could get the property?

Expert Answer

Hi Bonnie,

I cannot answer this because it is a legal question that may require a review of the laws of the state and the trust.  It would seem that a Quit Claim Deed would seem reasonable from all who had a possible interest who were not willing to participate with any steps necessary to protect their interest (whether that means pay money to retire the debt or monthly payments on a new loan, etc.), but I cannot say and I would strongly suggest that you contact competent legal counsel with this question.

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Question From Larry F. on 5/22/2018

My sister who is widowed lives on her Calif Ranch of 4 acres. The house is held in an irrevocable trust with her owning 50% and the other half going to her decedent husbands 2 kids after she dies. Is it possible for her to take out a reverse mortgage on her half of the property. The value of her half would be 500,000.00...thanks

Expert Answer

Hello Larry,

She would not be able to get the loan under these circumstances.  As would be the case with any other FHA-Insured loan, the title would have to be clear to be able to be used as the security for the loan.  If there are others on title to the property and HUD had to enforce the terms of the loan, they would be unable to do so if others who did not agree to the terms of the loans were also on title.  Also, what would the lender or HUD do if the co-owners didn't pay their taxes or maintain "their half" of the home?  How would they enforce the terms on half the parcel?  Unfortunately they could not.

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Question From Ellie on 5/08/2018

My friend is a beneficiary of a life estate from a friend (no blood relation). The ultimate beneficiary after death of the life estate beneficiary are the children of the grantor (through a trust). The trust provides that the beneficiary of the life estate must pay mortgage (on top of ordinary maintenance, etc). The house has been owned by the grantor and the beneficiary since 1992 with reverse mortgage (1st and 2nd Notes), the total amount of which roughly equals the FMV of the house. During the lifetime of the grantor, the co-owners never paid anything on the reverse mortgage Question: Is the lifetime beneficiary now responsible for paying at least the one-half owned by the deceased grantor per the trust terms, or will the mortgage note govern this issue? And/or will the beneficiary of the life estate (from her assets after her death) be responsible for the mortgage?

Expert Answer

Hello Ellie,

These are questions you need to ask of a licensed attorney in the state in which the property is located.  It really doesn’t have anything to do with the loan or the terms of the loan but with the rights and obligations of heirs and parties to the trust and for that, you really do need to consult with a licensed attorney.

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Question From Gayle on 4/17/2018

My step-father set up a revocable Living Trust naming me executor and successor trustee in the event of his death. He has since passed away. As successor trustee, can I get a reverse mortgage ?

Expert Answer

Hi Gayle,

The Trustee of the Trust is usually the one who administers the trust and this may or may not mean that you also are the sole beneficiary of the trust or the “owner” of the property now.  If you inherited the property, you live there as your primary residence and the property is in a revocable trust for which you are now the beneficiary and trustee, the chances are very good that you can now get a reverse mortgage on the home but you would have to have the trust reviewed first before anyone could tell you that for certain.

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Question From Bill on 4/14/2018

I want to add property with existing reverse mortgage to revocable trust. Is this possible, assuming that it meets HECM requirements?

Expert Answer

Hi Bill,

This is not a problem at all.  Have your attorney prepare the trust and submit to the servicer for approval before you change title.  Once the trust is approved, you can change the title with no worries.  You just don’t want to make the change until after approval just in case there is something in the trust that is not ok.

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Question From Nora M. on 4/04/2018

Can you get a reverse mortgage if you have a living will?

Expert Answer

Hi Nora,

The presence or absence of a will does not affect your ability to get a reverse mortgage in most cases.  If you also have the title to your property in the name of a trust in conjunction with that will, the trust has to meet HUD guidelines but that is even still acceptable. 

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Question From Gail F. on 4/03/2018

My dad had my sister and I in a life estate on his home. Years later he took out a reverse mortgage but his name never appeared as ‘mortgagor’ just as ‘owner’. Our names were shown as ‘mortgagors’ but she and I were both under age 62. Now that my dad has passed we’ve realized this and are wondering if the document (R.M.) is void as it was an FHA HECM RM? Don’t know anyone that has handled a RM with a life estate in WI.

Expert Answer

Hi Gail,

This sounds odd but I certainly can’t make any judgements with the information given and without having been part of the transaction.  I would definitely suggest that you seek counsel with a qualified legal representative in the state in which the property is located.  I think it would be a wise investment just to know what all the documents actually stated, what the title is now, if it changed during the course of the loan and whether or not everything was handled appropriately.  If there were any mistakes made, he would be able to advise you on possible remedies.

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Question From Randy on 3/21/2018

I am living in my home with my sister in Texas. I am 64 and she is 62. My sister is NOT on the title of the home. We would like to get a reverse mortgage with both of us being on the loan so that in the event that I would die she could continue to live in the home. However, I would like the home to pass to my daughter upon my death. Is it possible to transfer ownership of the home to my daughter with the reverse mortgage still intact for my surviving sister to still be able to live there, or would the loan need to be repaid to transfer ownership?

Expert Answer

Hi Randy,

You’re caught between the desire to protect your sister’s ability to live in the home and your desire to transfer title to your daughter upon your death.  You can do one or the other, but to do both I think you would need to engage the help of an attorney to set something up (trust, etc) so that the title reverts to your daughter upon the death of both you and your sister, not just you.  Let’s go through how the reverse mortgage would have to be structured in order to protect both you and your sister and then the question is how do you get title to your daughter after that.

You and your sister would both have to be on title at the time the loan was taken out and then you would both be covered for life as long as one or the other of you was still living in the home.  As soon as neither of you was on title or living in the home, the loan would become due and payable at that time.  If the title went to your daughter upon your death, then the loan would become due and payable as a result of neither of you retaining title any longer.  In other words, even if your sister was still living in the home, if she was no longer on title after your passing the loan would be due and payable.

One or the other of you has to still be living in the home and be on title for the loan to remain active.  I am not an attorney and I cannot advise you on legal matters, but it seems to me that an attorney may be able to achieve your goals with a family trust though.  I would suggest that you speak with an attorney about setting up a trust that places the property into an FHA eligible trust whereby your daughter is the only individual who stands to ultimately own the assets of the trust after both you and your sister pass.  The attorney can tell you if this is possible and if there are any negative aspects to such an action of which I am not aware.  Again, I am not an attorney and I am not familiar with all the heirship laws in Texas but this is certainly where I would start and see if this would achieve your desired goals.

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Question From Yolanda C. on 3/18/2018

My mother had a living trust n my siblings are executors of the estate. My mother also had dementia which she was diagnosed in 2006 the reverse mortgage was granted in 2011. The bank failed to do a title search n my siblings were able to take out 250.000.00 from the property plus take money out of her bank accounts.

Expert Answer

Hi Yolanda,

I don’t see a question here but it sounds like you are questioning their rights to act on your mom’s behalf.  A title search would indicate the manner in which title was held and are you saying that the lender did not know the title was in the name of the trust and the loan was done to your mother as an individual?  Because I don’t know how you came to the conclusion that there was no title search completed.  If your mom’s house was in the name of her trust but she had authorized your siblings to act on her behalf, the fact that the property was in a trust would not prevent them from doing any loan.  Also, the fact that your mother had dementia which was diagnosed prior to the loan would not necessarily have prevented her from obtaining a reverse mortgage as long as there was a person who had a properly executed Power of Attorney or the court ordered a conservatorship that allowed for the reverse mortgage even after that. 

HUD’s rules for the ability to obtain a reverse mortgage for an individual who lacks competency (such as an individual with dementia) are very explicit.  If your mother had already entrusted them with a Power of Attorney which predated the onset of her illness, they had the legal right to encumber the home with a mortgage, reverse or otherwise.  Your mother gave them that authority by granting them power of attorney.  And it sounds like they may have been on her bank accounts as well or they would not have had the opportunity to take funds from them. 

Have you talked to your siblings about this matter?  I think I would start there to see what the money went toward – the loan may have been used to pay off an existing mortgage so that mom could stay in the home without having to make another mortgage payment.  It may have gone to living expenses or who knows what but they may surprise you and have records of money spent.  If you feel that they are not doing things in your mom’s best interest, then you may want to seek the counsel of an attorney.  You just have to realize that if mom had the foresight to establish a trust, she may have put the other steps in place that allowed your siblings to get the reverse mortgage with no shady actions whatsoever.  Maybe you can even contact mom’s attorney.  He or she may be able to give you some insight into your mother’s written instructions and who has the ability to act in what capacities for your mom as well.

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Question From Nat on 2/28/2018

Can the property that has a reverse mortgage be moved to trust?

Expert Answer

Hello Nat,

You can move a property encumbered by a reverse mortgage into an approved trust.  However, since the trust has to meet HUD parameters, you should have the trust created and send it to the servicing lender for review and approval before you change the title to the property.  Most trusts created today are acceptable but if the attorney who created the trust included any language that would make the trust unacceptable, or if the trust changes the title so that the original borrowers are not the trustees and therefore someone else became the trustee (owner) of the trust and property, the loan could be called due and payable.  This is why you would want the trust approved before you changed the title to avoid this mistake.

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Question From B. Daniels on 2/26/2018

From MA: Parents divided taxable assets. Dad passed 14 years ago, making his trust irrevocable. Mom still here, but ran out of money to live with. House paid for, all qualifies for reverse mortgage, except lender legal team said no because 1/2 of house under irrevocable trust, other 1/2 (hers) revocable. How do we get this through?

Expert Answer

Good Afternoon,

We do sometimes run across issues such as this and there really is no way to complete the mortgage on this property based on the fact that you can’t place the loan on half of the house.  The property title has to be clear for the borrower to obtain a loan, they can’t get the loan on half of the property.  If she can sell the home or her interest she could use her proceeds to purchase another home using the reverse mortgage on the property she buys in just her name if that would work.

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Question From Mark on 2/23/2018

A house that want to buy is in a revocable trust and the borrower died with a reverse mortgage. It has a 600K balance and trustee wants to elevate the 700k appraisal that I paid for to 900k+ to have borrowers wishes covered? It has been about 60 days since borrower's death and mortgage company is pushing.Trust was not funded Thoughts

Expert Answer

Hi Mark,

The lender has already done their own appraisal and if the home is valued at $700,000 on their appraisal as well and they see that the current trustee is refusing to sell for less than $900,000, they will not grant any extensions before it goes to foreclosure.  The lender is best served by allowing the heirs to sell the home and pay the loan off, thereby not have to go through the foreclosure process.  However, once it becomes apparent that the heirs are not making a good faith effort to sell the home or are completely unreasonable about the value expectations, they will begin the foreclosure process as the foreclosure itself takes a while and they won’t wait forever to begin.  If that happens, the trustee may get more reasonable about the asking price or you may have another opportunity to purchase at the foreclosure sale by bidding since the lender can only start the bidding at what is owed is owed on the loan (plus foreclosure costs) and then any other bidders bid from there but the lender cannot bid again higher.

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Question From Charles S. on 2/10/2018

After borrower died the property subject to reverse mortgage that was in a living trust, was sold by me as successor trustee. The loan was paid our of the sale proceeds but the mortgage company was overpaid. Subsequently, the mortgage company sent check made payable to the deceased rather than the trust. The mortgage company has refused to reissue the check in the name of the trust and the bank refused to accept the check in the trust account. I'm trying to pay the beneficiaries and close the trust. What should I do?

Expert Answer

Hi Charles,

If the loan was also in the name of the trust, I don’t know why this should be such as issue.  Have you gone higher at the servicing company to request assistance?  If so and you have gotten no help, you may have to request an attorney get involved to settle the matter.  This seems extremely odd though, especially if the loan was in the trust anyway but you may need to go over the head of the person who is planting their feet so firmly and go up the ladder a few rungs.

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Question From Secrette H. on 2/06/2018

Can a church have a reverse mortgage?

Expert Answer

Hi Secrette,

Reverse mortgages can be made only to individuals and their qualifying trusts.  The loan is based on the age of the youngest borrower with consideration of the property value and interest rates.  Churches, corporations, partnerships, etc. are not living beings with life expectancies that can be quantified and therefore risks and payback models determined.  HUD would have no way to set the amount available as there could be no expectation of an end date.

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Question From Sherry on 1/26/2018

I was under age nine years ago when we took on the reverse mortgage in just my husbands name. Our property value has went down so when I turn 62 I was not able to become part of the loan or refinance. We are now doing a trust and the legal aid put the house in the trust with both of our names on it. Is this legal or will I get some type of repercussion? Or do I even want to be on the grant deed.

Expert Answer

Hi Sherry,

There is no problem adding your name to title now and it’s actually a good idea.  Not only do the loan documents not prohibit it, there is specific language that allow it.  As long as your husband’s name remains on title, he can add you with no repercussions to the loan at all (but remember to have the trust approved with the servicer). 

The reason this is actually a good idea is so that if anything happens to your husband, you need to make a decision if you want to sell the property, obtain financing in your name and keep it or just walk away from it with no further obligations.  If you choose the latter, being on title is not important.  The reverse mortgage is a non-recourse loan and if you choose to let the lender take the home and not pay off the loan or sell the house after your husband passes for any reason, the lender cannot seek repayment from you in any other form regardless of whether you are on the title or not.  However, if you do want to sell the property to retain any equity or if you do want to obtain any financing at that time and keep the home, you would not be able to do so until you were on title to the property.  If you wait until after your husband passes to do this, there could be delays with probate, etc. at that time that interfere with your plans.   If you are already on title, you can make your decision immediately and then act at your speed, not some court with a time constraint.

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Question From Kendall C. on 1/24/2018

Can the living trust property be changed to individual names? escrow company or lender qualify to do this service?

Expert Answer

Hi Kendall,

As long as the reverse mortgage borrower who was the Trustee at the time of the original loan is still living in the home and will be the one whose name the property is transferred to, this would not be a problem as long as the trust allows it.  If you are talking about a loan that has not closed yet, the owner can certainly also take the home out of the trust and place it into their own name, also provided the trust allows this pursuant to the terms of the trust. 

But I would suggest you have the attorney who prepared the trust make the change and not a third party such as a lender or title company/escrow company make the change.  They may be able to physically prepare the Deed to change the title, but there may be other implications that need to be considered.  If the change of title is not done correctly, there could be tax consequences, there could be a provision in the trust itself of which the lender/title is not aware or other issues that would make the attorney a much better option.  Two examples come immediately to mind and am I sure there may be others.  One was a borrower who had her title changed and the change was not prepared so that it did not trigger reassessment of the property.  She went from a very low tax base to a much great cost and at last report, the taxation authority was not backing down.  Another example was a borrower who took a property out of a trust and when he did it, it triggered some provision in the trust for a sale and division of property with family members who did not have a good relationship.  I don’t know if you have any issues like this with your circumstances or not but I truly believe it is worth the cost to have it handled correctly the first time!

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Question From Linda J. on 1/22/2018

6 years ago my parents passed away. I am the Primary on a small Trust that also had a SNT. I was told 6 years ago that I had to move from my parents home; sell the home; and a small property would be purchased for me.The SNT could never be funded due to the size of the Trust.I have been moved into a small property. However, I will be moved frequently as the Trust needs to gain equity to keep the Trust afloat.Can the Trust purchase for me another property now and then secure a reverse mortgage? This will not provide me any additional funds. I am trying to prevent being moved frequently.If this is possible can the Trust then pay for any repairs to the property versus forcing me to pay for these repairs.

Expert Answer

Hi Linda,

It seems to me that this question can be asked one of two ways and there could possibly be a different answer.  Can the trust purchase a home for you?  I can’t answer that.  That would depend on your trust and how it is established and the terms.  You should seek the advice of competent legal counsel on that issue.

The second possible way this question could be asked is can you purchase a home in the name of a trust.  The answer to that question is yes, as long as the trust meets HUD requirements.  Again though, I am not familiar with all the terms and I would caution that you would want to be sure that the reverse mortgage would allow you to remain in the same property as the costs to move multiple times would be prohibitive if the loan did not achieve that goal.  With regard to the costs of the property, we have had income and expenses met by trusts in the past that were acceptable, again though, it would depend on the terms of your particular trust.

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Question From Michelle on 1/02/2018

As a military widow with Reverse Mortgage and a significant other sharing the home; can I place the property in a Revocable Trust or other legal instrument whereby said party can continue living in the home as beneficiary Trustee after my passing and act with Power of Attorney following my death to distribute or sell real and personal property? Can he qualify as a non-borrowing party beneficiary? Should any sale of the real property be required, those resources would go toward the payoff of the Reverse Mortgage. My significant other is not on the deed or Reverse Mortgage loan. We were not together at the time this action originated. We are prohibited from marrying because I am a military widow who cannot afford to give up my military benefits.

Expert Answer

Hello Michelle,

The existing loan will be called due and payable when you are no longer living in the home as your primary residence under the terms of the loan.  The benefits are determined based on the age of the younger spouse and so, any time borrowers married to younger spouses after the date the loan was closed, the benefits would not be accurately determined if that younger spouse were allowed to be placed on the loan  and given the same option to stay in the home for life without making a payment.  The program is not designed to allow for the addition of others after the close as that would completely throw off all assumptions and there would be no way to compute borrower benefits. 

You can place the home in an approved trust as long as the trust meets HUD’s requirements and most do since the requirements are geared toward borrower protection in most instances (have the trust reviewed by the lender before you change the title to be sure it meets all of HUD’s requirements).  You can also add anyone to title at any time as long as you remain on title (if you transfer title to someone else in its entirety and you are no longer on title with them, the loan would be called due and payable).  The trust or adding another to title now might make it easier for them to sell the property if something were to happen to you but unfortunately, it would not allow them to remain in the home without paying off the loan.  Since the loan would be due and payable, if they wanted to remain in the property, they would have to either have sufficient funds to pay off the loan themselves of seek other financing at that time to refinance the reverse mortgage loan that has become due.

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Question From Confused in CA on 11/16/2017

A family friend who has no family had my Mom listed as his executor of trust and my minor children listed second.We think he may have taken a reverse mortgage on his home. He passed away in 02/16. Nobody contacted my Mom regarding his home. We cleaned the home out & did nothing further with it at that time (that I’m aware of). My Mom passed on 03/17. My husband went to check on our friends home to see how the property was looking. There was a notice posted from HUD stating nobody may enter Home until it’s listed.What does this mean? If my children were listed in the trust, then shouldn’t we have received an option to buy the home before it going to foreclosure? He had no mortgage, but may have had the reverse mortgage, but in what I’ve read it seems to me the executors would have been given option to buy home. Can you give me some insight into this and if there is anything I should do?Thank you.

Expert Answer

I have no way of knowing if the property was vested in the name of the trust or to the family friend as an individual.  If the property was vested to the trust, then the successor trustee (your mom) would have had to contact the lender to settle the reverse mortgage when the primary borrower passed in February of 2016.  When the borrower first acquired the reverse mortgage, he designated an “alternate contact” on his loan.  This is an individual who the lender can contact in the event of incapacitation, death or for any reason if the borrower cannot be reached (if all contact is broken off as would be the case if the borrower passed).  I don’t know if your mom was that individual or not but that would be who the lender attempted to contact once they could no longer reach the borrower. 

If the property was vacant and no heirs contacted the lender to attempt to settle the reverse mortgage account, eventually, the lender would file a foreclosure action.  As your timeline suggests, the borrower passed in February of 2016 and that is when the loan became due and payable.  After a period of time, the lender would file a notice of default, there would be specified periods of time mandated by local laws during which the lender would have to wait until the property would finally go to foreclosure sale after various notices are filed (usually includes recorded notices, advertising, etc. before a lender can complete the foreclosure and can take a year or longer to finish).  The lender starts the actual Trustee’s Sale amount with only the amount owed on the loan plus any costs accrued and may not increase their bid at the sale (so if the house is worth more than the amount owed, the lender cannot bid against other purchasers in an attempt to make a profit).  If the home went back to the lender and ultimately HUD, then no other purchasers outbid the lender’s opening bid to acquire the property.  It sounds as though that after more than a year and a half, the property has gone to foreclosure and is now owned by HUD. 

If no one outbid the lender at the foreclosure sale it is likely the balance owed on the loan made it unattractive for other potential owners or investors to buy the property.  You may still be able to contact HUD and purchase the home based on the same consideration they give to heirs, 95% of the current market value if they  don’t have to pay for real estate services to sell the home.  I don’t know if this is an option or not. But if the balance owed was higher at the time of foreclosure, this would have been the same ultimate cost to keep the home at that time (the payoff amount on the loan or 95% of the current market value whichever is less) if they allow you to complete the transaction at this time under these terms.  It’s worth a shot if that is acceptable to you.  

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Question From Kevin B. on 7/24/2017

Lender gets news of the last borrowers death by what means, if not by the exec of the trust, or a family member?

Expert Answer

Hi Kevin,

The vast majority of the time the lender is notified by services they subscribe to that monitor data bases such as the social security data base.  When individuals pass, hospitals, mortuaries and others are required to make certain notifications and there are services that monitor these data bases and can alert lenders and others when individuals receiving benefits have passed.

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Question From Kevin B on 7/23/2017

What are the HUD guidlines for putting ones property in a trust, before refinancing an existing reverse mort?

Expert Answer

Hi Kevin,

There are very few trusts these days that do not meet the HUD parameters.  HUD is very concerned that the trust protects the borrowers' interests without causing issues when/if the borrower passes and most trusts do just that.  If you plan to place the property into a trust, just have your trust reviewed before you record the Deed that transfers the title and once you receive the approval, you can transfer the title with no issues.  If there are any changes that need to be made to the trust, they can easily be made before anything is recorded with the property.

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Question From Stephen M. on 6/29/2017

Irrevocable Trust owns the property... Can the executives trustees execute reverse mortgage?

Expert Answer

I cannot answer this question without seeing the trust and having it reviewed.  Typically it is better if the trust is revocable, but there have been instances when irrevocable trusts have been approved as well.  You would have to submit the trust for approval and then we would be able to tell you if it would be acceptable and who would need to execute the loan documents.

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Question From Glenda B. on 6/06/2017

How much time does the executor of the trust have to report the death of the last borrower.

Expert Answer

Hi Glenda,

I would be willing to guess that lenders receive notification most of the time by means other than the family so when you ask "how much time...", I'm not sure if you are referring to the time before the lender finds out anyway or what.  I think that being ready and having a plan really helps when the time comes and expressing that plan to the servicer when called will make all the difference in the world.

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Question From Tom G. on 4/19/2017

I became a trustee for a trust created by my cousin before he passed away. He has since passed away and I am managing his affairs. He owned a single family residence which is now part of the trust assets. My cousin left a life estate for his friend who occupies the home and will continue to occupy until her death. Cash is running out---is a reverse mortgage an option?

Expert Answer

HUD does have a provision to allow for Life Estates but you must be able to meet the HUD parameters as specified below.  Since I believe the way you have explained this the trust would be the "Remainder man", it would not meet the HUD requirements as stated but that could be determined with a full review of the circumstances if you wish to pursue it further.

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Question From Helen on 12/13/2016

If there is a trust on the house, can I still apply for reverse mortgage?

Expert Answer

Good Afternoon Helen,

There are some trusts that would not be acceptable but by and large, most trusts do meet the HUD parameters and therefore do allow borrowers to place the reverse mortgage on those properties.  However, if you are concerned that the trust in which your property is included does not meet HUD guidelines, we would be happy to go over it with you at your convenience.

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Question From Carl M. on 8/14/2016

I want to buy a house and title in my revocable trust is this possible?

Expert Answer

Hello Mr. Muller,

You are welcome to close in your revocable trust. We must request a full copy and have it reviewed with our title companies trust attorney as a condition of your loan approval.  

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Question From David S. on 6/21/2016

My mom put her house in a living trust. She has a reverse mortgage on it. She has passed away, can i or do i transfer the house deed to me who is the beneficiary of the property?

Expert Answer

Hi David,

I am sorry but I really can't advise you on such matters.  Each trust is a bit different and I don't know how your mom set hers up, nor could I give legal advice on the title even if I did have a copy.  I would suggest you contact the attorney your mom used to establish the trust if you don't have legal representation of your own you can ask questions of and I am sure they can tell you what steps you should take to ensure the title is as it should be.

Mike

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Question From john on 11/20/2014

I have the home in sole trust. I am unmarried but have lived with my "wife" for years. She inherits the home by last will. Do we qualify for this program?

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Question From Blanca on 5/08/2012

If my dad has a living trust and wants a reverse mortgage, is there any additional legal work needed?

Expert Answer

Hi Blanca-

There is a trust review that has to be done by the lender to be certain that the trust does meet HUD guidelines but the cost of the review is sometimes covered by the lender and when it is not, it is usually less than $200 and can be added to the closing costs rather than paid in advance, out of pocket.  Most of the trusts we see do meet the guidelines but every once in a while we do need to get an amendment drawn up to meet the requirements and that is usually quick and easy.  The only way to know though is for you to submit the trust to the lender and let them do their review. 

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Question From Debbie on 11/06/2011

Thank you for taking the time to answer my question. We live in AR and my husband and I have a irrevocable trust. My question is if something were to happen to him would I be able to get a reverse mortgage since it is not mentioned in the trust? -Debbie

Expert Answer

The trust would have to be approved by the lender as meeting HUD guidelines and one of the things they look for is that the trust is revocable, not irrevocable (among other things). I am not an attorney and obviously could not give advice on a trust I had not seen even if I was so I would suggest that you find an attorney who renders legal opinions on trusts for lenders as to whether or not they meet HUD guidelines and have the trust reviewed. If it doesn't meet the standards and cannot be changed, the property would be ineligible for HUD lending programs and you really need to know that.

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