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Reverse Mortgage Trusts

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Question From Peter M. on 11/25/2019
Can my mom get a reverse mortgage when her estate is in a irrevocable trust?
Expert Answer

Hello Peter,

Some properties that are in irrevocable trusts still meet the HUD guidelines.  The only way to know for sure is to have the trust reviewed for compliance.

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Question From Ed W. on 11/10/2019
My best friend owns a home with a reverse mortgage. I have resided in the home for 7 years and am her caretaker. I' am the trustee of her estate. Upon her death she wants me to sell the home at market value and make sure her estranged children do not have any or gain any control. A will was made up stating this. Will I, the trustee has full control upon her death to sell the home at market value and pay the lender? Or can the lender just come in, kick you out and sell the home for what is owed regardless of the equity? She has specifically stated in her will that her children are to get nothing. Thank You
Expert Answer

Hello Ed,

When the borrower is no longer living in the home, the reverse mortgage becomes due and payable.  The lender has no rights to just go in and kick anyone out of any home. 

They would only be able to remove any occupants after a foreclosure action and they owned the home.  The lender also does not determine at what amount and heirs sell the home.  The lender does have a lien on the property though. 

If you try to sell the home for less than what is owed to the lender, the lender does not have to agree to allow the sale to go through and can choose to foreclose instead.  If you sell the home for an amount over the amount owed, there would be no issues with your sale – as far as the lender is concerned. 

I cannot comment on heirship laws or what might happen if any of the heirs of the owner were to contest the transaction.  Just remember though that even if there is still equity in the property, the lender will not wait forever for the sale to be completed. 

If you do not make positive moves toward either refinancing the loan or selling the property and repaying the obligation, sooner or later the lender will initiate a foreclosure action and if that goes all the way to completion (usually 5 to 6 months from the day it is started), then you could be removed from the property as a result of the sale if you were still living in the property at that time.

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Question From Dia C. on 7/07/2019
Hello, my dad had a reverse mortgage done wrongly to him. we have a rev trust which I am successor trustee. I moved in the time to take care of him for many years and paid all bills and ins and taxes on home. Now my dad has passed. My realtor and I listed home to sell. we had a contract that fell through, so we continue to proactively get another. I have been sending and corresponding with the huh company appropriately... I am now down to the last extension and we have not sold yet...
Expert Answer

Hello Dia,

Title can remain in the name of the trust because your father was the Trustee and the beneficiary of the trust.  The trust had to be reviewed at the time to be sure it gave your father the right to encumber (take out loans) in the name of the trust. 

The reverse mortgage allows this for the life of the original beneficiary or beneficiaries in the case of married or joint owners who are both eligible under the reverse mortgage program parameters.  It does not cover all subsequent successor trustees, however.  The loan is not and never was intended to be a multi-generational loan. 

If you wish to keep the home, you can do so by refinancing the home with a new loan at this time.  That loan could be a standard or forward loan, or it could even be another reverse mortgage if you qualify under the program requirements.  However, the loan does not stay active after the last original borrower or trustee on the loan permanently leaves the property. 

The fact that it may or may not still be revocable has no bearing at this time regarding it being due and payable.  When dad passed, if there were no other original borrowers left living in the home, the loan became due and payable at that time under the terms of the Note and Deed of Trust.

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Question From Marion A. on 7/02/2019
How do I create a will not allowing my child to any part of my assets and properties
Expert Answer

Hello Marion,

You would need to visit a local estate attorney and tell them what you want and have the will and possibly trust drawn up.  I don’t know what state you live in but some states are much more concerned with heirship laws than others and the estate attorney will be able to tell you what you need to do and what rights any heirs also have according to state laws. 

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Question From Bob on 4/04/2019
I am trustee for my brother in law and he wants to get a reverse mortgage on the house that is left to him. This is the only asset the trust has. Is it legal and what would my liabilities be?
Expert Answer

Hello Bob,

I cannot give you legal advice so to get advice on any possible liability, you would need to consult an attorney.  However, I can answer the question about the loan to the brother in law in the name of the trust with you as the trustee.  It is legal to get a reverse mortgage in the name of a trust and it does not matter that you are the Trustee.  Just know that if you choose to do this, as the trustee you will also be involved in the origination of the loan and will be signing loan documents. 

The loan has no recourse other than the property but again, you need to speak with your attorney to determine all possible issues and responsibility you accept as the trustee.  The borrower must be living in the property and must be the beneficiary of the trust.  If there is more than one beneficiary of the trust, all beneficiary’s must be eligible for the reverse mortgage and must all occupy the property.   

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Question From Elena on 2/28/2019
My husband passed away and to keep the house, my primary residence, I must do a reverse mortgage. The Title of the house is in our revocable living trust and I am a surviving trustee, there are no other assets. Can I, Trustee, transfer the title to my name prior to applying for reverse mortgage?
Expert Answer

Hello Elena,

I am afraid I cannot answer that because it depends on the terms of the trust and whether you’re trust allows that.  You must have the trust reviewed by an attorney to tell you that.  I do have a question for you though.  Is there some reason you want to take it out of the trust first?  HUD does allow properties to be in a trust if the trust meets their requirements and nothing you have said so far would lead me to believe it would not be approved. 

You can have the trust reviewed by your lender and we could tell you quickly whether the trust meets HUD’s requirements.  Even then, if a revision is required, that can usually be done with a short amendment to the trust to change whatever provision in the trust violates HUD’s rules, but this is not typically even required as most trusts are approved as written these days.  Unless there is another reason you want to take the home out of the trust, I would advise leaving it in and just having the trust reviewed by the lender for acceptance.

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Question From Bonnie on 2/24/2019
Hi, my mother had a Reverse Mortgage, and she is deceased. She left a trust to her 5 children. The house is in foreclosure now, and only one child wants to get the house, what must be done for that person to get it? The other four do not want to sign their trust to that sibling, what should happen to retrieve the house. Thank you
Expert Answer

Hello Bonnie,

The house is in foreclosure because the loan is now due and payable.  The heirs have the option of paying off the loan (either by refinancing the loan or with other funds available to them) or selling the property if they do not want the lender to foreclose on the property. 

If 4 of the 5 children want nothing to do with the home and it is going to be foreclosed by the lender anyway if they do not, I would suggest that you approach the family about transferring everyone’s interest to you before the foreclosure so you can obtain the necessary financing to keep the home. 

I cannot advise of any possible ramifications for taking the property out of the trust and distributing to just one of the 5 heirs and would strongly recommend that you speak to your attorney and/or financial advisor, but if none of the other heirs want the home and if it makes sense, why not at least talk to your family and tax attorney?  You may find that there is some reason it is not feasible, and you may find that there is no downside to doing it but you never know until you ask.

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Question From Nancy on 2/23/2019
My mother just passed she had a reverse mortgage I took care of and I live in the house we also have a living trust so the house is now mine what next steps do I take?
Expert Answer

Hi Nancy,

You must decide what you want to happen with the home and then take the necessary steps to achieve your goal.  You can pay off the loan by refinancing the loan and continue to live in the house if that is your desire.  The loan can be repaid for the outstanding balance of the mortgage or 95% of the current property value, whichever is less.  If you decide you do not want to remain in the home, you can always sell the property as well.

The first thing you need to do once you know what you plan to do with the home is to perfect your title.  You may or may not need to go through a probate and so I would suggest you contact the attorney who prepared the trust and who placed the title of the home into that trust.  The attorney can best guide you through the steps needed to complete everything so that your property title does pass to you without a hitch.  You need the title to be in your name in order to finance or sell the home, so it’s not wasted effort.  This is assuming you want to keep or sell the property.  Your third option is to walk away and owe nothing and let the lender deal with the property and if this is your decision, you do not have to worry about perfecting your title.

As stated, the third option you would have would be if you check the value of the home and compare it to the amount owed and decide that you do not want to hassle with the disposition of the home and would rather let the lender take the home back.  There is no recourse to you and if you do not want to repay the existing loan or if values have not increased, if you are unable or unwilling to obtain new financing for 95% of the current value and you do not feel as though keeping the property is in your best interest, you can simply choose to allow the lender to take the property and owe nothing.  I do not recommend this though unless there is absolutely nothing to be gained by retaining or selling the home.

I have outlined the steps you should take here.

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Question From Richard on 2/08/2019
I have a reverse mortgage as a single owner and only occupant. I want to put my home in trust for a friend. I know that the loan will still become due and payable when I die. My question is, how long will my friend have to sell the house and pay off the loan?
Expert Answer

Hi Richard,

You are correct, the loan becomes due and payable as soon as you are no longer living in the home.  How long it takes the lender to call the Note due and payable is another thing.  Lenders find out about the passing of borrowers in several different ways.  If the lender is alerted immediately and the heir is diligently working on selling the property, the HUD has outlined a 6-month period with 2 possible 90-day extensions for most markets to sell a property.  When the sales were sluggish and it was taking 18 months to sell a home, HUD extended this allowance but that is not necessary at this time. 

But having said this I do give you this cautionary warning.  HUD approved lenders know that even if they started the process to foreclose immediately, by the time they obtain the appraisal they need, file all paperwork and start the process, the entire foreclosure would take close to 6 months in the shortest of instances with all steps required by HUD and by law. 

So, if your friend is diligent about marketing the property for a reasonable price and all signs point to the fact that the heir is working toward the repaying of the loan, he should have more than enough time to complete the sale.  However, if nothing is happening or the asking price is well above the current market and the lender feels that there is no reasonable expectation of a sale any time soon, sooner or later they will make the decision to begin the foreclosure.  This might be especially true if they determine that you had passed 9 months earlier and they had not been informed and there was no progress toward a sale. 

I know that the last thing families and friends want to do is to jump in to a loved ones’ home and start cleaning it out for a sale, but just like other unpleasant chores or bad news, delay doesn’t make it any better.  Have a conversation with your friend and make sure he and your family (if any) know your wishes in advance.  Have him talk to senior real estate specialists in the area. 

Very often, they can help him work with estate sale folks if that is something with which he must deal in order to get the home ready for sale.  The professionals who handle these sales day in and day out are wonderful and can make a daunting task so much more bearable.  I honestly believe that most people just dread the thought of doing what needs to be done to market the house and putting it off can put them in a bad spot if it shortens the time, they have available to complete the task.  A little communication in advance helps immensely. 

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Question From Carol H. on 1/17/2019
Can a reverse mortgage be put into a Living trust after the loan has already been closed?
Expert Answer

Hi Carol,

Yes, it can if the trust meets HUD requirements.  You should send a copy of the trust to your servicer along with the instrument you intend to use to put the title into the name of the trust but do not make any changes to the title until after you receive their approval. 

They will review the trust and give you approval if everything meets HUD standards (and most trusts do but some don’t, and some require some slight addendum).  Once the servicer has given you the approval, then you can make the title change through your attorney or title company and all will be good. 

As with any title change, I always suggest that borrowers utilize a professional’s help such as a knowledgeable attorney or title company so that you do not accidentally incur any taxation issues by not using the correct forms, etc. to be sure it is a tax-exempt transfer.

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Question From T Soriano on 1/14/2019
What happens if your home is in a trust and you only have an unsigned copy of the living trust? It just as if there were no trust formed? What happens when someone dies? Would the court get involved since the home is recorded in the trust even though the copy isn't signed would the estate be able to be settled outside of probate? Thank you
Expert Answer

I am sorry, I could not begin to weigh in on this with the information available.  Different states have different laws and we do not give legal advice in any event.  I would suggest you check with the attorneys who set the trust up though.  Many times, they keep a signed copy and sometimes are trusted to keep an original signed copy.  At any rate, that would be the first place to start.  If they do not have a signed copy or original, they certainly would be able to advise you of the laws in your state about the need to probate the property based on your circumstances.

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Question From Amye L. on 1/11/2019
My adopted parents purchased a plot from the county & then built a house. My father passed all his vested title to my mother, who then created a life estate & living trust. While creating this deed she listed me as the remainder on the same day she took out a home equity loan she then became lifetime tenant I was still listed as the remainder. Part of her living trust express that all her interest immediately be transferred to me & that I then also get all her powers upon her death. Today I went to the state controller an submitted her death certificate they said the property will be changed into my name in 24 hours.I think I may be a victim to zombie foreclosure. I also entered into a contract with the state of MD to pay the property taxes every month. Do you think the bank still has a leg to stand on? Also, the deed of trust testimony was sealed after it was delivered to the court house. Sealed for 11 days, while the bank signed a home equity loan with my mom, she never used any of the money she left it for to inherit per the deed of trust. Do you think the bank has a leg to stand on?
Expert Answer

Hello Amye,

I am afraid this is one you will need to run past an attorney in the state.  This is not a reverse mortgage question but rather a legal question regarding the title, heirship rights and lien standing.  If mom owned the home and borrowed against it and the bank lent money in good faith, I don’t personally see how the lien would be deemed invalid if she was also during doing other title maneuvers that the bank may not have been aware of.  But then again, that is not a call I have to make and would suggest you check with a licensed attorney to see what you should do at this point.

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Question From Sean on 1/01/2019
In 2010 my mother in law and father in law were beneficiaries of the house they live in now. They were both put on the deed. In the same year they did a reverse mortgage, except that at that time my mother in law is not at the age of 62 yet. What ended up happening is that my mother in law came off of the deed in order for my father in law to qualify for a reverse mortgage. My mother in law is not on the deed now nor the reverse mortgage. My father in law has dementia now and has very rare moments when he is of sound mind. What will happen to my mother in laws house when my father in law passes away? Will she be able to stay? Will she be able to sell us the home that way we make sure she has a home?
Expert Answer

Hello Sean,

I can’t answer the questions you are asking because they deal with the title to the property and not the loan.  Let me ask you a few questions.  Did they ever put her back on title?  Is the property in a trust or in their names as individuals?  We recommend that anyone contemplating this action before HUD changed the rules in 2014 consider it very carefully as it often seems like a great idea at the time, but not always so good later down the road when things like this happen. 

But when borrowers decided to go forward with this plan of action, we always recommended that they add the spouse back to title immediately after the loan closed.  The documents allowed for it and it is always easier to do it while all parties are still alive and before any illness than later.  I can only hope your in-laws received the same counsel and that your mother-in-law is back on title now.

If she is, they can remain in the home if the husband still lives in the property.  Once he leaves the property as his permanent residence (i.e. moves to assisted living or passes), then the loan would become due and payable and you would be looking for a vehicle to refinance the existing loan if you want to keep the property. 

If she is not on the title to the home at this time, I would suggest you contact an attorney in the area to see about taking whatever steps can be taken to add her to title at this time, if that is possible.  If the original borrower remains on title, there is no problem adding the spouse to title as well.  You just can’t remove him from title completely or the loan will become due and payable.

I would ask the attorney about possibly establishing a trust with mother and father-in-law as trustees to put the title to the property into because I can’t advise you on such matters.  It may require a court appointed conservatorship at this point given his state but again, it is easier to do things now rather than later especially if you wait until you have a loan that is due and payable. 

What I can advise is always remembering to have the trust approved by the lender to be sure that it meets HUD requirements BEFORE you allow them to transfer the title to the property.  Most trusts do meet HUD requirements but the last thing you want to do is find out after you transfer the title that this one does not, and you just triggered a due on sale clause. 

Once the title has been changed in accordance with lender/HUD and your family’s requirements and needs, it will make it fine for mom to remain there with the reverse mortgage in place as long as dad is still in the home as well and then it will allow her to do whatever she needs to do with the title as the remaining trustee after dad no longer occupies the home and you all need to make other provisions. 

And maybe the attorney will advise against the trust route and go in a different direction altogether but whichever way you all choose to go, my recommendation is to do it sooner rather than later.

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Question From Sarah M. on 12/18/2018
My home is titled to a revocable trust. I am the trustee. I have had the same roommate for 18 years. We are both of the same sex but no relationship other than roommates. My roommate is heir to the trust. If I should die before she does can she inherit the home with the reverse mortgage?
Expert Answer

Hello Sarah,

The reverse mortgage does not dictate to whom you may leave your home.  If you wish to make her the individual who will inherit the property when you pass, that is entirely up to you.  The bigger issue here though is that the loan will become due and payable at that time.  She will own the home, but she will have to determine if she wants to remain living in the property or if she wants to sell the home. 

Either way, the loan must be repaid at that time so if she wants to remain living in the property, she would have to pay the loan off with funds available to her or refinance the loan with a new loan (traditional forward loan or a reverse mortgage of her own at that time).  If she sells the property, then the proceeds would pay off the balance of the loan and any remaining funds would be hers.

The only way to avoid this eventuality would be for her to also be on the loan and on title when you close the reverse mortgage.  If she is also 62 years of age or older, there does not have to be a relationship of any sort as you describe, she just must be on title and living in the property to also be on the loan.  That would allow her to live in the home for life as well should something happen to you that would cause you to leave the home as your permanent residence (death or move to assisted living, etc.). 

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Question From Aaron K. on 12/15/2018
My parents are applying for a Private reverse mortgage through FAR's HOMESAFE program. They want to know if they later wish to convey their equity in the property to me via a Trust, if that will make the loan due?
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Question From Lori W. on 12/04/2018
Mom abducted signed quit claim deed and an irrevocable trust not signed by lawyer or notary. Trust is recorded but still shows mom as the owner. Can she do a reverse mortgage she owned the house in full help her she has no means of living?
Expert Answer

Hi Lori,

I am afraid I don’t quite understand.  Your mom was abducted?  That would mean she had been taken somewhere by force so is she in the home or not?  Also, if she signed a Quit Claim Deed, to whom did she Deed the title?  You say, “she owned the house” (past tense), who owns the house now?  I’m sorry, there is just too much I cannot determine. 

Your mom or her trust must be the owner of the house now, she must meet the eligibility criteria for age, income and credit and she must live in the property as her primary residence.  If it is owned by her trust, that would have to go through legal review and the trust would have to meet HUD requirements.  If it does not, those issues can usually be rectified but I honestly don’t know what we are looking at.

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Question From Bonita on 11/22/2018
Can a Delware Business Trust, now known as a Delaware Statutory Trust, qualify for a reverse mortgage?
Expert Answer

Hello Bonita,

HUD does allow family or individual trusts, but not business trusts.  All trusts must go through a legal review and must meet HUD requirements or the loan would not be eligible und the HECM program. 

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Question From Cee Jae Terrell on 10/19/2018
What does a reverse mortgage in trust means to the survivors?
Expert Answer

Hello Cee Jae,

This is something you really should discuss with your trust attorney.  The trust typically allows borrower’s families to move faster when it comes time to make any final arrangements for the sale of the property after the borrower passes because the trust does not die, the trustee is transferred to a successor trustee and the trust continues.

The loan still becomes due and payable though so the borrower’s heirs still need to determine what they will do to satisfy the loan at the time by either paying off the loan with other funds available, refinancing the loan with a new loan, or selling the property and that does not change whether the title is in the name of the trust or the individual.  The trust may make it easier to proceed though and is worth discussing with your attorney.

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Question From Dave on 10/11/2018
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 9/17/2018
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 8/19/2018
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 7/22/2018
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 7/07/2018
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 6/14/2018
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 3/20/2018
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 1/21/2018
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 11/15/2017
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 7/23/2017
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 4/18/2017
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 6/20/2016
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?
Expert Answer
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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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