My mother has a reverse mortgage and recently had to go into a nursing home as she is terminally ill. Her reverse mortgage has been sold a few times (that is normal). According to the agreement we had to notify “said reverse mortgage company” that she was no longer living in the property. We were told by phone (we failed to document who, what, where) that we had six months to sell property and possible extensions up to a year. Two weeks later we received a notice that the foreclosure process has started and that if we do not acknowledge the letter they sent within 30 days that the debt is valid and the loan must be paid off within 30 days to stop the foreclosure. We have a realtor set up to sell property once the estate sale is complete but the property will not be sold anywhere close to 30 days but we do expect it to be sold before the six-month mark. What steps do you recommend we take considering this situation?
Firstly, I tell borrowers to use the time allotted to them in the legal documents to their advantage.
The agreement states that absences longer than 12 months constitute a permanent move so I would advise borrowers and their families to begin making plans for the sale of the home as soon as they are aware of the fact that a reverse mortgage borrower will not be returning.
This alone will usually give most families many extra months as most time families are aware that the move is permanent long before the 12 months allotted to the borrower to be absent the home in the legal documents.
The notice outlined in the Deed of Trust that you mention refers to property that ceases to be the primary residence of a borrower by reasons other than death and the other absence it referring to would be something like the borrower(s) move to another home and start renting the subject property, etc.
The Terms then go on to further outline the absence the borrower is allowed up to 12 consecutive months before the lender can call the loan immediately due as it is deemed that absences longer than 12 months are permanent and are no longer temporary, which are allowed.
I have heard others say that they were told they had 6 months with a 6-month extension as well and I cringe when I hear this statement because it really depends on whether the absence is due to death or what.
I urge all borrowers and their families to read the legal documents as that is what dictates the terms of the loan and they should know what their plans will be should this even arise.
Your lender can require immediate payment of all sums due and is specifically spelled out in the Deed of Trust:
Lender may require immediate payment-in-full of all outstanding principal and accrued interest,
upon approval by the Commissioner, if:
(i) The Property ceases to be the Principal Residence of a Borrower for reasons other than death
and the Property is not the Principal Residence of at least one other Borrower; or
(ii) For a period of longer than twelve (12) consecutive months, a Borrower fails to occupy the
Property because of physical or mental illness and the Property is not the Principal Residence of
at least one other Borrower; or
(iii) An obligation of the Borrower under the Security Instrument is not performed. payable status
is not permitted when a Lender requires immediate
payment in full under Paragraph 6.
You can download a sample .pdf of the Reverse Mortgage loan agreement here.
Seek Legal Council
I am not an attorney and cannot advise you legally, but I would suggest that you do contact legal counsel.
If your mom has not been out of the home for 12 months, she has not violated the terms of the agreement as of this time and only your notification that it is no longer her primary residence has allowed them to start anything.
Can she move back in at this time if it has been less than 12 months?
If so, it would seem to me that action would certainly stop the process as she would follow all terms of the agreement and you could demonstrate that your first notification was in error.
If later she was forced to move back to a nursing home, remember the terms (ii) above and while you are determining whether or not the departure is temporary or permanent, you may want to take whatever steps are necessary so that if the departure looks like it will become permanent, you are ready for that eventuality.
In this manner, you can certainly take steps to contact a realtor and place the home on the market while mom is still in her 12-month temporary absence period before you must contact the lender to notify them that she will not be returning if that becomes necessary (and if the home has not sold before then).
Top 5 FAQs
Can a reverse mortgage be used for nursing home expenses?
If there are more than one borrower on the loan and at least one original borrower is still living in the property, the funds can be used for any purpose. However, if all original borrowers have moved from the home the loan would become due and payable.
Can you lose your home if you leave to a nursing home?
There is no provision in the reverse mortgage to transfer title of your home to a nursing home or any other 3rd party. You need to read all contracts and agreements carefully to determine what you agree to with these entities.
How long can you leave your home if you have a reverse mortgage?
You must live in the home for more than half the year for the home to be considered your primary residence. Vacations are fine if you meet this requirement but if you leave your home for medical reasons, you may be gone for up to 12 months before the absence is considered permanent under the terms of the loan and the loan becomes due.
Can the reverse mortgage lender find out I went to a nursing home?
Reverse mortgage lenders conduct occupancy inspections and do have other methods to determine occupancy. If you are aware that you must permanently leave the home, it is best to make whatever provisions are required to repay the loan (sale, refinance, Deed to heirs so that they can finance in their names, etc.) before the lender forces action.
How long do heirs have to pay off a reverse mortgage?
There is no set time under the terms of the loan for heirs to repay the obligation. The loan becomes due when the borrower no longer occupies the home as their primary residence. If the heirs are making good faith efforts to sell the home or refinance the loan, the servicer will work with the heirs and typically give several 3-month extensions going out to a year (sometimes longer). However, if the lender feels that there is no honest attempt to repay the obligation or the heirs are not communicating with them, etc., they are not obligated to wait for 12 months to begin foreclosure as that alone can take 5 months or longer to complete one begun.
- Reverse Mortgage Occupancy Requirements
- Can You Leave Home with a Reverse Mortgage?
- Reverse Mortgage Vacated Property, Deed in Lieu of Foreclosure.
- Medicare.gov: https://www.medicare.gov/nursinghomecompare/search.html?
- A Place for Mom http://www.aplaceformom.com/nursing-homes