How to Sell Your Home If You Have a Reverse Mortgage

September 26, 2023

Is it true that if an inheritor or owner of a reverse mortgage decides to sell the home and asks for less than the loan amount, the reverse mortgage company holding the note cannot request more than the amount the seller asked for?

You have asked a question that covers distinctly different scenarios, and the answer to each scenario differs based on the circumstances. If a borrower passes and the home goes to heirs, the lender will also order an appraisal.

If the property is worth less than what is owed on the mortgage, the lender will work with the borrower’s heirs to allow the home to be sold at less than the loan balance. This would be known as a short sale, and any such sale would require lender/HUD approval after they received and approved the contract for sale and had appraised the property.

HUD will also allow the heirs to repay the obligation at 95% of the current market value or the amount owed, whichever is less, upon the death of the reverse mortgage borrower. This option is written into the mortgage loan documents and requires the lender or HUD to obtain an appraisal of the home.

Reverse mortgages are non-recourse

The reverse mortgage is a non-recourse loan, and the lender cannot look to other assets to repay the obligation. However, when you say that they can “never request more than the seller asked,” that would not be true and is a bit misleading, especially if the homeowner has not passed.

The seller could not ask for a sales price well below the current market value and expect to sell to a family member or friend at half the current market value and think they could complete the sale at that amount. The lender would be forced to accept it.

Also, suppose the seller is the original borrower and has yet to pass. In that case, there is no right to repay the loan at 95% of the current market value rather than the amount owed. If such a provision existed, family members could step in and sell/buy homes every time the market fell downward, ensuring a loss to HUD.

Bona fide third-party sale

In the event of a sale by the current owner or by heirs to a third party, the lender would obtain an appraisal on the home, and any payoff amount less than the full mortgage balance would be dependent on that current appraised value, or they could still exercise their right to foreclose on the mortgage.

The lender and HUD are not under any obligation to accept less than the amount owed on the loan under a sale to a third party.

In most cases, if the owner has passed and the sale is for the actual market value, the short sale would most likely be approved because if that was the value at which HUD or the lender believed, they too would be forced to sell the home, there is no reason to go to the added expense and time to foreclose and market the property.

However, suppose the seller had yet to pass, and there was any question about the legitimacy of the sale. In that case, the approval for repayment at less than the full amount owed may not be granted.

However, they still could not obtain a deficiency judgment against the original owner or their estate for any amount they did not receive to repay the loan from the sale. That is the non-recourse nature of the loan.

Selling Upside Down

The second circumstance is if the original borrower decided to sell the home. However, the value was now well below the outstanding balance, and the borrower would still be responsible for the outstanding loan balance (just as any borrower would be on any home they sold).

There is no option for a borrower to decide they wanted to move with the expectation that HUD would incur all loss because of their desire to move before they passed or could sell the home for the amount owed.

However, even if the borrower did leave home when it created a loss on the reverse mortgage, there can be no deficiency judgment if the borrower decided to move or had to move but could not pay the mortgage balance.

In other words, the loan would default, and the borrower would go through foreclosure. Still, no deficiency judgment would force the borrower to pay any amount the lender could not recoup through a foreclosure sale.

This would not be a healthy alternative for most borrowers as they would have to pay to live elsewhere. Their credit would be adversely affected (as well as they would not be eligible for any other FHA-insured loans until any losses had been repaid).

This may not even be a consideration for borrowers moving permanently into assisted living or nursing homes. This may be a wrong choice with lasting repercussions for borrowers desiring to purchase again who are still active and rely on good credit.

There also may be other tax implications to the borrower or the estate if they took equity from the home and left with a balance owing on the loan. Borrowers should always consult with a tax professional before making arbitrary decisions.

Top FAQs

Can you sell your home if you have a reverse mortgage?

Yes, you can. A reverse mortgage is just a loan, and as the property owner, you can choose to sell the home and pay off the balance any time you wish. Reverse mortgage loans do not have any prepayment penalties either.

How long do you have to sell a house with a reverse mortgage after death?

If you inherit a home that had a reverse mortgage loan you want to get in, contact the loan servicer within 30 days of the borrower’s passing. From there, you will need to keep the lines of communication open. Suppose you are trying to sell the property. In that case, the servicer will give extensions of time in 90-day increments, up to a full year, if necessary, to get the property sold.

Does purchasing a home take longer if the seller has a reverse mortgage?

No, it does not. If you plan to buy a home that currently has a reverse mortgage loan, the process on your end will be the same as if they had a conventional loan secured against the property. Upon the conclusion of the transaction, that loan is paid off just like any other loan via the seller’s proceeds. Then, the lien against the home is reconveyed (removed).

Is a reverse mortgage transferable to a buyer?

No, it is not. A reverse mortgage loan is not assumable and must be paid off in full via the sale transaction. That being said, a buyer can use a reverse mortgage (if they are eligible) to purchase the home even if it has a reverse mortgage on it currently in the name of the seller.

If I sell my home with a reverse mortgage, am I eligible for another one?

Yes, if the loan was paid in full as agreed. The only time someone would be barred from getting another reverse mortgage loan in the future is if they defaulted on the last reverse mortgage and allowed a property to go into foreclosure. We have done several loans for customers who got a reverse mortgage on one home and then decided to sell that property and use the reverse mortgage again to finance their next home.

ARLO recommends these helpful resources:

Purchase Reverse Mortgages: Rates, Down Payment & Limits

America's #1 Rated Reverse Lender Celebrating 20 Years of Excellence.

TALK TO OUR HUMAN EXPERTS TOLL FREE: 800-565-1722

LAUNCH REVERSE MORTGAGE CALCULATOR

Have a Question About Reverse Mortgages?

Look no further. Michael G. Branson, our CEO, brings a wealth of knowledge directly to you. With a robust 45-year tenure in mortgage banking and 20 years dedicated solely to reverse mortgages, he's the expert you want on your side.

Post your question in the comments below and anticipate a personalized response from Mr. Branson himself, typically within one business day. He's here to illuminate all angles of reverse mortgages, ensuring you're equipped with the knowledge to make informed decisions. Take this opportunity to gain insights from a seasoned professional.

116 Comments on this Article

Kenny
July 31st, 2024

If your parents have a reverse mortgage, can they sell the home while alive and pay back the reverse mortgage company?
Reply to Kenny
- Michael Branson
  July 31st, 2024
  
  Hello Kenny,
  You can sell the home at any time you wish. The loan has no prepayment penalty, so you would need to repay the loan plus any interest or fees that have accrued. You are free to pay off the loan if you sell the home, refinance it with another loan, or if you have other funds available. In any case, there would be no prepayment penalty.
  You own the home and have not given up any of your rights to sell or finance it if you wish. The reverse mortgage is just a loan. It has provisions that require you to live in the house as your primary residence as long as the loan remains intact, but you have complete discretion on whether to keep the home, sell it, or retire the reverse mortgage with payment of the amounts due at any time, without a charge to do so other than the normal costs for final documentation, which are nominal.
  Reply to Michael
  - Adam
    October 21st, 2024
    
    Hello,
    
    We are moving my 97b year bold father from his home to be closer to family. His reverse mortgage balance is likely higher than the home's market value. If he receives an offer on the home that, after fees (commission and taxes), doesn't fully cover the loan balance, he may need to request a short sale from the bank/HUD. If an appraisal finds the market value to be even lower than the offer (for example, if the loan amount is $200K, the offer is $175K, and the HUD appraisal is $130K), what happens next? Would the sale proceed at $175K, but only 95% of the $130K would need to be paid to HUD? Would the difference be a profit to my father in the short sale?
    
    Reply to Adam
    - Michael Branson
      October 28th, 2024
      
      Hello Adam,
      HUD does allow an heir of the borrower to pay off the loan at 95% of the current appraised value if they wish to keep the home, but this provision doesn't apply to other short sale situations. If the home is placed on the market and a purchase offer is made, that offer must be submitted to HUD for approval. HUD does not automatically accept 95% of the appraised value from anyone other than the borrower's heir, nor does it agree to accept less than the full amount of sale proceeds, allowing some funds to go to the borrower when the sale amount is less than the loan balance.
      If you think the home could sell for more than 95% of its current appraised value, you can reach out to the lender servicing the loan for HUD and request a full payoff amount as the heir. In this scenario, they would obtain an appraisal and provide you with a payoff demand based on that appraised value. If you accept these terms, you could pay off the loan using your own funds or secure a new loan in your name. Once the loan is paid in full and you own the home, you are free to sell it at any price. Any additional profit from the sale would be yours.
      If your father does not have an heir willing or able to pay off the loan, the sale could proceed at the offered price ($175K in this case), but HUD would not provide any proceeds to him if the sale price doesn't cover the outstanding loan balance.
      Reply to Michael
AISHAH L.
April 8th, 2024

My mom has a reverse mortgage. I understand with an HECM mortgage, if she passes away, the family can sell the home for 95% of the appraised value to pay off the loan, whichever is less. Thanks
Reply to AISHAH
- Michael Branson
  April 8th, 2024
  
  Hello Aishah,
  You're close, but that's not exactly the case. HUD will allow the borrower's heir(s) to keep the home and pay off the existing loan for the amount owed or 95% of the current market value, whichever is less. So, it is true that if the family wants to keep the home, they have the right to pay off the loan at less than the amount owed when that payoff balance exceeds 95% of the home's current market value.
  When it comes to a sale to a third party for less than the amount owed, that would be considered a "short sale" and would be subject to HUD approval. In other words, you would need to submit the offer paperwork to the lender, who, in turn, submits to HUD, who must approve the terms because they ultimately must pay the claim on any shortfall. They may approve the sale at 95%, or they may not. They are under no obligation to accept any amount less than what it takes to pay the loan in full (and at payment in full, you don't need their approval for the sale).
  Theoretically, you would think they would approve an offer quickly that paid them 95% of the current value because if they need to foreclose, they incur additional costs, including those to foreclose, holding and selling of the property, additional interest, etc., but it often is not a rapid process. If you know you will need to sell for less than the amount owed, I suggest you speak with the servicer to determine how likely they are to work quickly with you. You can always weigh the option to Deed the property back to the lender, let them sell it, and walk away owing nothing.
  Reply to Michael
Robbie D.
March 16th, 2024

My mother, who lived in the State of Texas, took out a reverse mortgage in 2005. She filed bankruptcy on early 2000 and passed in 2023. The mortgage company was going to foreclose as my brother, as the executor, did not inform them of her death and was not paying the payments or insurance or taxes. I filed bankruptcy as an heir to keep the home. My son is now wanting to purchase the home and he has a HUD certified appraisal done, which is it $108k. The mortgage company states the payoff at $179k. What is the 95% guideline? Isn't it we pay 95% of the appraised value or the payoff, whever is less?
Reply to Robbie
- Michael Branson
  March 19th, 2024
  
  Hello Robbie,
  The heir of the borrower has the right to pay the loan off and keep the property at the lower of the balance owed or 95% of the current appraised value. They will not use an appraisal that you obtained on your own but rather an appraisal that they order from a HUD approved appraiser ordered in conjunction with a HUD request.
  I'm not sure I understand from your statement that he would qualify for the heir benefit if he's purchasing the home and not the heir. It sounds like you could qualify as the heir and then could sell the property to him though after you paid off the loan, or perhaps you could set up the legal heirship so that he isn't purchasing the property but is inheriting the home, but I can't advise you and these are just options you might explore. Perhaps you should speak to an estate attorney to make everything work with your estate plans and HUD rules so that everyone wins.
  Reply to Michael
Kiara M.
July 13th, 2023

Hello Arlo,

My question is, once the home has reached its maximum limit, is the house sold for its value or the reverse mortgage amount? For example, the reverse mortgage amount is $245k, but the property value is $400k. The owner is still living and wants to sell to a relative. Is the sale price the $245k owed to the reverse mortgage company or the full value of $400k selling price?
Reply to Kiara
- Michael Branson
  July 13th, 2023
  
  Hello Kiara,
  As the owner of the home, you still own the property and can sell it for whatever you choose to sell it for. A loan on the property must be paid off when the house is sold, so you want to keep that in mind, but other than that, you are free to sell the house for whatever amount you choose that will pay that loan off. If you sell it for $245,000, the loan would be paid in full during the escrow/title closing, and you would receive nothing after the sale. If you sold it for full market value, you would receive your $155,000 equity (minus any costs you incurred). The house is always yours to do with as you please. The reverse mortgage is just a loan, it gives the lender no right to set your sale price when you want to sell the property other than you need to be sure you sell the property for a sufficient amount to pay that loan off. That loan becomes due and payable when you move or sell out of the property. Keep in mind that you will need to repay that unpaid loan balance and keep your sale price about that amount, but otherwise, you decide what you want to sell the home for. The lender doesn't set the selling price, you do (just like you would with any other type of loan).
  As long as you pay the loan back, anything you sell the home for over that amount belongs to you. You can sell it for the full market value or anything below your chosen amount. In fact, it's not uncommon for borrowers to sell to other relatives and give them a discount of the amount generally paid as real estate commissions, costs to improve the house or to market it, etc., and both parties benefit from the sale. This is usually around 6% - 10% of the market value (depending on the relationship, the costs to sell, the amount of work needed, etc.). Still, even that is up to the seller and the buyer to negotiate. There is no "rule" you must follow when determining how much you want to discount your sale price for a family member. A little advice is to have your family member contact their lender in advance, review the proposed deal you plan to have, and be sure they are ok with the terms in advance. This might be considered a "non-arms length" transaction by many lenders with a purchase price of less than the full appraised value between family members if that is the case, and there may be issues/special procedures they need to consider.
  Reply to Michael
Jane
June 16th, 2022

Hi Arlo,

My grandmother has a reverse mortgage. She decided to sell the house and move into an apartment. She planned to move on a certain date, but the house had not sold yet. My aunt paid off the reverse mortgage, so her mother could move to the apartment. Who owns the house? My aunt? My Granny?
Reply to Jane
- Michael Branson
  June 16th, 2022
  
  Hello Jane,
  Paying off the loan does not change the ownership. Unless your grandmother signed the house over to your aunt with a Grant Deed or other such instrument, the title (ownership) is still in her name even though she paid off her mother's loan.
  There may be other agreements or your aunt may have even filed a Note secured by a Deed of Trust for the funds she advanced on behalf of her mother to protect her interest (especially if there are other heirs involved) but unless your grandmother granted title to the home to your aunt which could be the case too depending upon how much your aunt paid or the agreement between the two of them, the title of the home would still be with grandmother if all your aunt did was pay off the loan.
  There's just no way to know what may or may not have occurred without checking title records and even then, they could have done some things without recording the documents and so title records may not tell the full story at this point.
  Reply to Michael
Santiago
May 23rd, 2022

Hello Arlo: Short-sale question:
Living owner, widowed, in mid-70's has a reverse mortgage payoff of $320K (original note was lump sum of $150K in 2009). Home was built in 1970's, looks in obvious state of neglect. It needs lots of interior and exterior work (structural, roof, mechanical, plumbing, foundation, flooding, cosmetic, all appliances).
Estimated total restoration cost is $150K+. Owner can't afford restoration. Finished comps in area appraised at $380K - $420K. Based on the home's current condition a realistic appraised value, i.e., buyer offer, would be $125K. Owner has maintained payment obligations (taxes, insurance) and not presently in default. She wants to sell through a realtor/short-sale rep. who will prepare a detailed build-up defending owner's appraisal of $125K.
Given the proposed steep discounted offer ($320K payoff discounted down to $125K), are the bank and HUD likely to consider this mortgage for short sale approval? Given your experience, is there sufficient incentive for HUD to settle this loss now to mitigate a sure loss at some future point? There are also unforeseen hardships to this sole surviving senior that may assist if hardship is a consideration.
Reply to Santiago
- Michael Branson
  May 23rd, 2022
  
  Hello Santiago,
  
  With any Short Sale request, HUD will have the servicer order an appraisal and will consider the offer based on the information contained in the report.
  If the appraiser states that the current value "as is" would be $125,000, they would consider that offer. If the appraiser finds sales of comparable properties selling for $200,000, they would not accept a sale price of $125,ooo and would prefer to take the home back and sell it themselves.
  Any short sale amount they accept will be a loss on which they will need to make the lender or investors whole (pay a claim) so they will be looking to minimize the amount of the loss as much as possible.
  Reply to Michael
Betsey L.
May 17th, 2022

Hello Arlo,

I got a reverse mortgage on my home in 2011. I now wish to sell it to move out of state. I owe Novad $550,000 & the home may sell for less than that plus there would be a realtor's fee. the balance owed has been including an extra 1% Interest in case the house would not sell for enough to cover my repay to Novad. I called Novad & was told i had to first submit a contract of sale to them, and they said then it would then be appraised & I could sell it for 95% of the appraisal. This sounds backward to me. I have spoken to several realtors who say this sounds strange.

How do I proceed? How can I find someone knowledgeable about selling a short sale property with the reverse mortgage? I have taken great care of the property & I am hopeful I can sell it for maybe $600,000, but just don't know if it will. But I want to do everything right & want to expedite the sale. Would really appreciate your advice!
Reply to Betsey
- Michael Branson
  May 17th, 2022
  
  Hello Betsey,
  
  If you can sell the home for more than is owed, you don't need to even get HUD/NOVAD involved in the sale. I would say that your first action would be to contact a senior real estate specialist agent to have them review your home and compare it to other similar homes that have sold recently to see what you really could expect from a sale.
  If you can get $600,000 or more from the sale of the property, your proceeds should be adequate to pay off the loan. If the property sells for more than is owed on the loan, HUD is not going to accept less than the full amount owed anyway (the 95% option would only be available if the property appraised and sold for less than the amount owed).
  If your agent informs you that the home will most likely sell for less than the $600,000 needed to pay off the amount you owe and any other costs, then he/she will advertise the home as a "short-sale" meaning the buyer will know that the amount they are purchasing for will be less than the amount required to repay the loan in full and must be approved by the lender. Most real estate agents with a decent amount of experience should know how to handle a situation like this because it is not that uncommon.
  Reply to Michael
Terry V.
May 10th, 2022

My reverse in now under Novad. I want to sell my home. What is the process that is needed to do this? Can I contact a realtor? Or does this have to be done by Novad?
Reply to Terry
- Michael Branson
  May 10th, 2022
  
  Hello Terry,
  
  You own the home and can sell it whenever you desire. Keep in mind though that NOVAD is not always the most responsive servicer so be sure to keep that in mind as you plan your actions.
  Let your realtor know as well as the closing or settlement agent from the start so that they can be sure to request the Beneficiary's Demand in plenty of time to accommodate your anticipated closing.
  You should be receiving a monthly statement so you know how much you owe on the home and this would be a good piece of information for the real estate agent, especially if they are trying to advise you to sell it for an amount less than what you owe. Other than that, the process is pretty similar to any other homeowner selling their home.
  Your settlement agent will contact your servicer when the closing is nearing and obtain the Demand for Payoff, payoff your loan from the proceeds when they have the buyers' funds (along with any other needed payments) and then disburse the remaining proceeds to you.
  Reply to Michael
Eric M.
April 2nd, 2022

Hello Arlo, my father passed Sept. 15, 2021. The deed upon death transferred ownership into my name, Feb 2022. The amount due to the lender is $155,000. I decided to put the house up for sale on 3/8/2022. There has been a delay due to the title company regarding title insurance. The lender filed a execute to sell with the county recorder on 3/11/2022. I just received 25 certified letters from the lender stating they have started the foreclosure process. There are multiple cash offers for $320,000 +. I am close to resolving the title company issue. My question is can you estimate if there is still time to sell and close escrow before the reverse mortgage company forecloses on the property. Thank you in advance. You are amazing.
Reply to Eric
- Michael Branson
  April 2nd, 2022
  
  Hello Eric,
  
  Every state has different foreclosure laws and the answer to this question might depend on those laws as well as when the foreclosure was filed and at what stage that action stands now.
  I would strongly recommend that you contact an attorney that specializes in this area of law. He/she can tell you if the filed action is just in the preliminary stages and if you still have months left, if you are nearing the end and need to act more quickly or if there are any legal means for stays (postponements or delays) available to you under the law given your circumstances.
  By all means do not lose your equity of $150,000 +/- over a small attorney fee if they need to file papers for you. This is a time when the expense of a little professional advice is well worth the cost.
  Reply to Michael
Mary H.
March 15th, 2022

I am a real estate broker. I have been asked to take a listing on a home which has a $ 330,000.00 reverse mortgage balance. I believe the home is worth no more than $275,000.00 How is this handled? Thank you.
Reply to Mary
- Michael Branson
  March 15th, 2022
  
  Hello Mary Helen,
  
  As is the case with any short sale, the lender (or HUD if the loan has been transferred to HUD) must approve any short sales prior to them taking a payoff for less than the amount owed.
  I would really suggest that you have the borrowers contact their servicer to determine if the lender or HUD will allow a payoff for less than the amount owed and if so, she amounts before you try to market and sell the property.
  Reply to Michael
Erika
June 29th, 2021

I am purchasing a home where there was a reverse mortgage. Your Q&A asks "Does it take longer to close on a home if the seller had a reverse mortgage?" with the answer NO and yet we're over entire week behind our closing date because of the reverse mortgage. We have been held up by waiting for them to generate the payoff information. I asked if there was a deadline and was told that this type of lender is notorious for being slow. My realtor is asking escrow to hound the reverse mortgage company so that we close by month's end. Why would a company delay on producing a document? Is there a reason to be slow? I was told it takes a handful of people to generate the payoff but I don't understand why they can't be expected to work in a timely matter so we can meet our closing deadline. Is this common? Is there any way to speed things up or make them accountable? I really do not want this to drag into the next month.
Reply to Erika
- Michael Branson
  June 29th, 2021
  
  Hello Erika,
  
  Unfortunately, I cannot guess what the individual holds up on your transaction may be. There are several circumstances that can delay forward and reverse mortgages and having been in the mortgage banking industry for over 45 years, I see them all the time.
  It even amazes me when my own transactions are help up on my own loans that I cannot control, and I am in the business. I cannot tell you if it is the servicer, if there is documentation needed that is missing, if the closing agent forgot to request the payoff sooner or had incorrect information, didn't include needed signatures, if the title has a problem or what.
  And there are some reverse mortgage lenders who are just better at originating and servicing loans which makes them quicker or slower, but I would need to ask if someone told you that "this type of lender is notoriously slow" and apparently is indicating that they knew this, why they didn't request the Beneficiary's Demand sooner?
  I would guess that your escrow was for 30 - 45 days so if the closing agent you all chose to use knew that this type of lender was "notoriously slow", wouldn't it have made sense to order the demand a week or two sooner if this was "common knowledge"?
  And if it were common knowledge, did they inform you weeks ago that since they had to request the demand from "this type of notoriously slow lender" that it would probably close late? Seems to me if that was the case, they could have taken steps to mitigate the effect early on or at least tell you that in advance. Or could it be that the servicer of the existing loan is a convenient scape goat? I can't say.
  
  There are laws that require lenders to issue a properly requested Beneficiary's Demand within certain preordained time limits in most states that I am aware of (I am not an attorney and cannot speak for every state in the nation, but I have to believe it is true everywhere).
  The seller who is the person who has the loan being paid off and therefore has the clout with the lender. If the lender has exceeded the legal limit in producing the Demand for Payoff, the Seller could probably make things pretty hot for the lender.
  I think you may find that the lender is a convenient scapegoat but if not, if the lender is truly not performing up to the legal requirements, the borrower (seller) should contact the lender and if no help is forthcoming, can file complaints with several federal agencies.
  Reply to Michael
Maria
May 10th, 2021

In California, do you have to use a real estate agent to handle the loan payoff to a Reverse Mortgage company?
Reply to Maria
- Michael Branson
  May 10th, 2021
  
  Hello Maria,
  
  There is no requirement to use a real estate agent to handle a reverse mortgage payoff. Because reverse mortgages are loans made specifically to senior borrowers, they are regulated, and lenders are very careful about from whom they receive direction and to whom they reply though.
  They will only respond to borrowers and individuals authorized by the borrower. If you are not the borrower on the loan (i.e., an heir and the senior homeowner has passed), you need to be sure that you send the lender the proper documentation to show that you are authorized to act on behalf of the borrowers or their estate.
  Reply to Michael
Sandra F.
May 10th, 2021

My Mom willed the house to me she had a reverse mortgage. I chose to keep the home, but the appraisal expired as I was waiting for probate to appoint me executor it took long because of COVID-19. They are making me get a new appraisal and can't I just reinstate the expired one? Because now the price of house has been going up, it doesn't seem right.
Reply to Sandra
- Michael Branson
  May 10th, 2021
  
  Hello Sandra,
  The process is to obtain a current appraisal when determining the amount that HUD will accept from family members for payment of the loan if that amount is less than the full amount owed.
  Since the agreement is that HUD will accept the amount owed or 95% of the current appraised value, the lender must obtain a current appraisal to determine what that amount will be.
  Just the same as if values had gone down further you would not want to pay 95% of an older, higher value that was no longer valid, HUD is not willing to accept and pay a loss on a short payoff of 95% based on an old value that is no longer valid and less than the amount owed.
  If the HUD procedures allowed it to be possible to choose which value families and lenders would use in markets where values were rapidly rising or falling, both lenders and individuals could begin manipulating closing times to try to time the market which could drive up losses to HUD.
  HUD takes their lumps when the market goes against them but there are also times when they too benefit from appreciation that occurs before the transaction closes.
  Reply to Michael
Pamela D.
January 25th, 2021

HI ARLO!
I recently purchased a home in foreclosure auction through HOA foreclosure in Florida. There is a reverse mortgage backed by HUD on the property which I understand that I am now responsible for. I have 2 questions 1) do I become the new borrower and therefore, if I live in the home, it cannot be foreclosed? And 2) Why did not the owner or the Mortgage company pay the HOA fees and allow the property to come into my possession? I am disabled and intend to use this home as my primary residence.
Reply to Pamela
- Michael Branson
  January 25th, 2021
  
  Hello Pamela,
  
  Let us start with your second question. I could not begin to guess why the old owner failed to pay the HOA dues. The lender did not pay the dues because the lender was not the property owner and it was the property owner's responsibility, not the lenders.
  The answer to your first question is going to be a little harder to swallow. No, you do not become the borrower on the existing loan and in fact, that loan will now be called due and payable.
  I sincerely hope that you were made aware of the reverse mortgage and the balance on the loan before you decided to bid on the unit and that the total cost when you add the outstanding balance of the reverse mortgage still makes your investment a good one.
  
  I have only had a very limited experience with an HOA foreclosure on one other unit and only from what the bidder/buyer told me through correspondence. The purchaser was not even aware of the balance on the reverse mortgage and thought the amount he paid at the auction was the full amount for which he was buying the unit.
  He had no idea that the reverse mortgage was now due and payable and being only 57 himself, he would have been eligible to apply for a new reverse mortgage even if there was equity still in the property but between the amount owed on the delinquent HOA dues and the outstanding balance on the mortgage, the property had no equity.
  He wrote to us since even though he paid over $10,000 at the auction, it was a total loss to him, and he was looking for some assistance. I honestly do not know what became of him after that, we could only advise him to seek the assistance of a real estate attorney because he said he was never advised of the true lien position of the property.
  
  I am sorry, I really do not know what I can tell you either. I can tell you that the reverse mortgage is not assumable and that as soon as the lender determines that the property title has changed or that the original owner is no longer living in the home as their primary residence, the loan will be called due and payable.
  I just hope that your circumstances are better than his and that there is equity in this unit that allows you to seek other financing or perhaps a new reverse mortgage of your own in your name if you are 62 or over and the condo project is still on the HUD approved list.
  Reply to Michael
  - Pamela
    January 31st, 2021
    
    Thank you so much for your thorough response and example. Fortunately, this particular property has quite a bit of equity beyond the balance owed. I can possible refi and pay off the existing Reverse Mortgage. My only puzzle is to season the home for 6 months in order to do so. Hopefully, with the assistance of my attorney, I can do so. I have learned quite a bit through this process and, since this does have some equity, possibly, I can race the mortgage company to the finish line or work out a plan to repay.
    Reply to Pamela
    - Michael Branson
      February 2nd, 2021
      
      Hello Mary,
      
      The closing attorney is correct. The payoff on a closing with a reverse mortgage is handled just like any other closing. The title company that handles the closing collects the funds from the purchaser and then sends the payoff in to the existing lender, pays off any other liens on the property so that the new buyer has only the loans used to purchase the property and then the remaining funds are sent to the escrow or closing attorney (if title is not also performing this function) to remit to the seller as the sale proceeds.
      In this manner, the title company can now insure title for the new buyer because they are certain that all liens of record have been paid in full. This is how the payoff of every loan is accomplished when someone sells their property and it still has an outstanding loan on the property.
      
      You are concerned that mom's loan may not be paid off, but the loan is against the property, not mom. The new buyer and the title company have far more to lose if mom were to get the funds and then walk away and not pay the loan off than you must worry about if they do not pay off mom's loan.
      If they did not pay off mom's loan and she had all the money, she would come out like a bandit because the only recourse the lender would have would be to foreclose on the mortgage while mom had all the money, and the new buyer was left holding the debt and the property that had two loans against it - mom's and whatever loan they used to purchase the property. Mom will get a closing statement and the loan proceeds check at the close and will receive the Reconveyance Deed once it has been recorded evidencing the payoff of the debt.
      And since reverse mortgages are non-recourse loans, the lender never had the right to seek repayment from any other assets from mom, she would no longer own the property and would have already left with her funds. So even if they did make an error, mom would already be out with her money and it would be up to the lender, the title, and the closing attorney to clear up the mess with the new owner.
      Reply to Michael
Lorrie
January 25th, 2021

Can you remove the appliances when you leave your reverse mortgage and give them the house?
Reply to Lorrie
- Michael Branson
  January 25th, 2021
  
  Hello Lorrie,
  
  Property is broken down into two different categories, real and personal. One simple distinction is anything that can be moved is personal and anything affixed to the land (cannot be moved) is real property.
  Fixtures are personal property that become real property because they are attached to the real property. Therefore, the distinction usually becomes the appliance itself and whether it is attached to the real property (built in) or if it is free standing.
  For example, a refrigerator that is standing in a space in the kitchen but is just plugged in or hooked up to a water line for an ice maker is not attached to the structure and therefore is personal property.
  A refrigerator that is built into the home and has been attached would be a fixture and part of the home now. Washers and dryers are usually free-standing and therefore personal property that can be taken while most dishwashers are typically mounted into the cupboards - but not all.
  Some coffee makers are free standing, and some are mounted in the cupboards and the same is true of microwave ovens. Some merely sit in an opening in the cabinets which does not make them fixtures while others are built in with the other ovens.
  
  To make a long story short, it would be very difficult for me to answer this question with a definitive answer not knowing the specific appliances you are referring to and whether they were considered permanent fixtures or free-standing personal property.
  If you took the argument to the extreme, most anything could be detached including water heaters, air conditioning systems, even entire houses but they are meant to be real property and you would have a difficult time justifying such an action.
  I think you just need to look at the appliance with the same thought. Is it a non-fixed personal piece of property or is it a fixture of the home?
  Also See: Reverse Mortgage Property Requirements
  Reply to Michael
Laurie
November 17th, 2020

How long does a reverse mortgage lender give you to sell your home after the borrower has passed away to pay back loan?
Reply to Laurie
- Michael Branson
  November 17th, 2020
  
  Hello Laurie,
  
  The lender will usually determine that the last borrower has passed within two or three months of the event and will begin the steps they need to complete to call the loan due and payable.
  They will need to perform an appraisal, contact the heirs, and ask what steps they intend to take to repay the loan. If the heir states that they will be selling the home, the lender will work with the heir and will monitor the progress.
  If the market is active, the lender will verify that the home is competitively priced and that all steps to sell the home are being taken and they will give typically give the heir 3 month extensions at a time as needed and as the market requires to sell the home. At this time, not many extensions are required in most markets around the country if the property is priced and the home is actively promoted.
  When the circumstances warrant, additional extensions may be granted as needed.
  If a lender began foreclosure immediately, it would still take 5 - 6 months from the time the lender began the action and since they usually do not determine the last borrower has passed for at least 2 - 3 months (and sometimes longer), it can take more than a year before a lender can expect to recover a home if the heirs are not actually trying to sell it or make any other provisions to repay the loan so lenders will not wait too long if there are no plans expressed by the heirs to pay off the loan.
  Also See:
  How to Repay Reverse Mortgage After Death
  Reply to Michael
Donna
August 14th, 2020

Hi ARLO, I just received a notice for the balance due on my reverse mortgage. I have sold my home for more than what is owed. My question is, when does the transaction to the reverse mortgage company take place? At the closing of my home? How are they notified I sold my home and how do I arrange for payment?
Reply to Donna
- Michael Branson
  August 14th, 2020
  
  Hello Donna,
  
  If you sell your home, the closing agent will contact any lien holders to obtain a Beneficiary's Demand for Payment in order to pay the lien in full and transfer the title free of any encumbrances to the new property owner (except possibly any new loans used by the buyer to purchase your home).
  The title company, escrow or closing attorney (depending on where you live and who is performing this service for you) handling your transaction will have you sign an authorization to contact the lender and obtain the payoff information so that they can pay the loan off at the close of the transaction.
  They cannot do that until they receive the purchaser's money and the transaction closes. Then you will receive any excess funds over and above your costs to sell and the payoff of any liens on the property directly from the closing agent.
  The time frame for your receipt of the funds also depends on where you are located, recording options available and they type of closing.
  Reply to Michael
  - Mary T.
    January 28th, 2021
    
    My 82 yr. old mother is closing on the sale of her reverse mortgaged home tomorrow, for 30k more than owed. The attorney for the buyer is handling the closing. My mother was under the impression that she had to handle the payoff of the reverse mortgage herself, mailing them a cashier's check, and settling with them. However, the attorney says no, he must mail the check to HUD, under federal law. My question is, is this correct? What guarantees does my mother have that it will be paid, and her obligation satisfied? What should she look for at the closing that proves it will be paid? Thanks
    Reply to Mary
Cindy T.
May 19th, 2020

What is the procedure for paying back a reverse mortgage by short sale?
Reply to Cindy
- Michael Branson
  May 19th, 2020
  
  Hello Cindy,
  
  Before you attempt to sell the property short of the amount needed to pay off the loan, you should contact your servicer to determine that they will allow the short sale to take place.
  They will tell you what they need and once you have approval, then you would be able to sell the home at an amount no less than the approved sale price.
  They will also give you the terms under which they will accept a short sale offer which would probably include that the sale must be to a bona fide third party and not a "non-arm's length" sale to a family member.
  I would advise you to contact your servicer and let them know the conditions in which you find yourself that require the sale at this time and go from there.
  Reply to Michael
Sean
March 3rd, 2020

Home will have to be sold via short sale. How do I write the letter of request for appraisal to the reverse mortgage lender?
Reply to Sean
- Michael Branson
  March 3rd, 2020
  
  Hello Sean,
  
  If the lender has completed an appraisal of the property, all you need to do is make a written request of that appraisal. I would send it to them first by fax or email so they got it right away but would also follow up with some method where you get a signed receipt of delivery.
  If you are the borrower on the loan or authorized by the borrower to act on their behalf. just tell them that you wish a copy of any appraisals done on the property and there should be no problem with them giving you a copy of any appraisals done.
  The request does not have to be in any certain format.
  Reply to Michael
Jimmy L.
January 16th, 2020

My wife and I have had a non-recourse reverse mortgage on our home for approx. 10 years. We have found it necessary, for several reasons, to move to another location. We had a real estate to give a comparable estimate on the home value. It was approx. $122,500. The current amount owed is $145,500. We are looking at giving a "deed in lieu of foreclosure." We have a very excellent FICO credit score. Would this damage our credit? Also, a short is being discussed. Which is the best route for us to protect our credit? We would like to get another reverse again in the future. Will HUD allow us to pay back their insurance account later, so we could apply for another reverse mortgage? Kindly, thanking you for your reply.
Reply to Jimmy
- Michael Branson
  January 16th, 2020
  
  Hello Jimmy,
  I can't tell you that your lender won't report, but I can tell you that in my conversations with servicers, they do not report reverse mortgages to credit bureaus. Because there are no payments due and the loan is a non-recourse loan, and the loan is designed to end with the passing of the borrowers or the sale of the home, there really is no point to it.
  I would find it very surprising if the lender reported your loan to credit bureaus at all. I have not spoken to all servicers so I cannot assure you that your servicer is also of this same mindset, but perhaps you could contact them and ask.
  Borrowers are ineligible for another reverse mortgage if they have a loss outstanding on a loan. Because you can live in the home for the rest of your life and you are choosing to sell the home at a loss now, HUD would not allow another reverse mortgage if the loss is still outstanding.
  However, you hit the nail on the head. If you repaid any losses to HUD, you would once again be eligible for the program.
  Reply to Michael
Wayne
January 5th, 2020

Thanks for all the valuable insight posted here. My dad is 93. He recently fell, and has decided that he needs to move in to an assisted living facility. He's had a reverse mortgage since the bubble days of 2005, with a current loan balance of $277,000. Based on the many comparables in the neighborhood, we believe the market price of the house will be approximately $225,000.

In the circumstances, it seems like offering a deed in lieu of foreclosure would be the right thing to do. Any downsides to that approach? Must the lender accept the tendered deed?

Now that he's made the decision (and found the fcility he want to go to), my dad is anxious to move forward. I get the feeling the lender won't be in a rush, and it will be hard for us to maintin the house (insurance, upkeep, etc.) and pay for the new place at the same time. Any thoughts about how we can get the process moving to a conclusion as quickly as possible?
Reply to Wayne
- Michael Branson
  January 9th, 2020
  
  Yes. The lender can only take a Deed in Lieu of Foreclosure once the property is "broom clean" and there are no liens on title other than the reverse mortgage. If there are any clouds on title such as other liens, the lender has to go through the foreclosure in order to be sure they do not inherit other debts. If there are no liens, make arrangements to be certain the home is free of all personal items and trash, then contact the lender and offer the Deed due to the fact that dad had to move.
  If everything is done, it is to HUD's and the lender's benefit to move quickly as well as interest that will never be repaid continues to accrue for the entire time the loan remains outstanding, increasing the claim/loss to HUD. if they don't accept the Deed, they will take the property back by foreclosure action if you do not plan to keep the home so it is to their benefit if the property is eligible for the Deed in Lieu to accept it.
  Reply to Michael
Daniel
August 12th, 2019

Hello - I came across your blog and find it very informative. After searching for answers for my question, I couldn't find any related to my topic. Hope you can provide me some guidance. I am helping my father sell his house in Banning, CA so that he can relocate to the Midwest near me for health reasons. The home will need to be sold as a short sale. The caregiver who was taking care of my father, until he had to go to a nursing home for 24-hour care, is interested in purchasing the home. The mortgage statement shows an amount due of about $280K. Zillow and another couple of companies show an estimated value ranging between $218k & $240K. The offer will be for about $230K. I understand that since my dad is not living in the house anymore, the loan has become due and payable. I am confused on how I should submit the estimated closing statement along with the short sale package. Would it be based on 100% or 95% of the appraised value. My realtor told me that there's only some costs the lender will allow to deduct from the purchase price, like commission, title, escrow, termite, property taxes due at closing, maybe home warranty. Should I calculate the deductions from the $230K? and should the deductions be based from 100 or 95% value of the purchase price. What if the estimated current value differs from the lender's appraisal? Do I wait for the lender's appraisal before the entering escrow? The caregiver cared for my father for a few years and knows that the home has a lot of deferred maintenance, but is willing to purchase it, if approved, and do the repairs little by little. Otherwise, I will have to let it foreclose. Any input you can share would be most appreciated. Thank you, Daniel
Reply to Daniel
- Michael Branson
  August 12th, 2019
  
  Hello Daniel,
  
  In any short sale situation, the sale is contingent upon the lenders' approval and your real estate agent should know how to present the offer so that it reflects this verbiage. The 95% rule is for heirs wishing to retain the property and pay off the loan at an amount less than what is owed based on a lower value, it is not relevant in this situation.
  However, you don't know what HUD will or will not approve at this point. They will probably want to complete an appraisal before they will tell you if they approve any terms you submit.
  If they believe it would cost them as much or more in the long run to foreclose and market the home themselves, they may accept the offer (even if it is only 95%). If they think your offer is too low, they would reject it and opt for the foreclosure. At any rate, you just never know until you try!
  
  Are you already authorized to speak with the lender on behalf of your father on the loan? Remember that if you are not on the loan, you do not have title to the property or have not been granted authorization to conduct business on the loan on behalf of your dad, the lender cannot even discuss the loan with you.
  If dad still retains capacity, he can contact the lender with you to give you the authorization to work with them and it will make things much easier. If not, if you have a Power of Attorney, he granted to you before he lost capacity, there will be other things you have to do before it will be recognized, but it will also help. An estate attorney can be extremely helpful at times like these and well worth the cost if you have not seen one already.
  Reply to Michael
Sandy
August 7th, 2019

My father had a Reverse Mortgage when he passed away. The loan was severely upside down and I did the Short Sale option. Is the property considered an asset to be included in the Inventory Value for his estate? His attorney says yes because it was appraised but my accountant says no without listing the corresponding liability of the loan amount...who is correct?
Reply to Sandy
- Michael Branson
  August 7th, 2019
  
  Hello Sandy,
  
  I am afraid I cannot give you legal or accounting advice. If you have opposing opinions, you may want to choose the one with which you agree or get yet another but unfortunately, we are forbidden by licensing law to offer any legal or accounting counsel since we are not licensed accountants or attorneys.
  Reply to Michael
RK
July 15th, 2019

Dad paid off reverse mortgage am I getting any money if lender sells the Condo?
Reply to RK
- Michael Branson
  July 15th, 2019
  
  Good Morning,
  
  I really am not sure what you're asking. Firstly, if your father paid off the reverse mortgage, there is nothing owed on the loan and the lender has no interest in the property. If dad paid the loan off, the lender has no right to the property and cannot sell it to anyone. Dad or his estate owns the home, not the lender.
  
  The lender could sell a property if the loan was not paid off but only if the borrower defaulted on the loan. Even then though the lender could not sell the property unless it first completed a foreclosure action on the property. This would be true for any loan, reverse or forward. But just as with any loan, on a reverse mortgage, your father always owns the property.
  The lender does not own the home unless they had to foreclose on the loan due to a default under the terms of the loan. In that case, if your dad (or you as the heir if dad has passed away) did not step in to take steps to cure the foreclosure and the action went all the way to foreclosure sale, the only money that might go to dad or to the estate would be any amount that someone else outbid the lender at the foreclosure auction.
  
  Finally, under any of the circumstances above, the decision of who money would go to would not be the lenders to make. The condo or the money in the estate would be determined by any wishes that dad left in his will, trust, etc. and absent any written instructions, it is typically decided by the courts through a probate action. I would strongly suggest that you contact an estate attorney to determine what rights you have before it is too late as well as determine any steps you need to take to protect your standing.
  Reply to Michael
LINDA B.
July 12th, 2019

I sold my home that has a Reverse Mortgage how long does it take to get a pay off balance?
Reply to LINDA
- Michael Branson
  July 12th, 2019
  
  Hello Linda,
  
  It typically takes anywhere from 3 -5 days. I think that some title and closing companies will typically wait until the last minute to request a Beneficiary's Demand because if they request it too soon, they have to get an updated demand later and that can create extra costs and delays so I know that they will often wait until the last minute and then if people move a close date because of one reason or another, the Demand either isn't ready yet or has to be updated.
  Reply to Michael
Charles G.
July 2nd, 2019

My dad had a reverse mortgage and died. I am their son and have lived in the house my whole life - 52 years. I can't afford to pay the loan. Is there a consumer protection that states that if I notify the reverse mortgage company that I want to sell the house myself they must let me do it (versus them doing it?) I could therefore price the house higher and be able to stay in the house longer, maybe 5 years...?? ... i.e.... take 5 years to get it sold?
Reply to Charles
- Michael Branson
  July 2nd, 2019
  
  Hi Charles,
  
  The loan is now due and payable. The lender has no requirement that you must allow them to sell the house. In fact, the lender does not own the home, dad's estate still does if you have not taken the steps to change the title yet and the lender cannot dictate to you how or to whom you can sell the house.
  The lender would rather you sell the home yourself or refinance the obligation with a new loan and pay the loan off but what they can dictate is the time allotted to you to accomplish this. The loan is now due and payable, and the lender will call all sums due under the Note and ask you what you plan to do.
  The lender will work with you for 3 months at a time with extensions available if they see that the home is being actively marketed and they believe everything is being done to sell the home in a timely manner. If they believe you are doing everything possible and the market warrants the additional time, the lender can grant extensions to allow for a successful sale.
  However, the lender would begin foreclosure proceedings and you would run the risk of losing not only the property but also any equity in it as well if they felt that you were not making a good faith effort to sell the home. This might be the case if your asking price is too high, if the marketing time exceeds other properties in the area, etc. In this case, the lender would begin foreclosure proceedings and your costs would increase even if the home sold before a full foreclosure was completed.
  If the lender did have to go all the way to foreclosure, the home would be sold at foreclosure auction and most bidders at the foreclosure sales do not pay top dollar. The beginning bid is the amount owed to the lender and then any amount bid over that initial bid (if any) would go to you. If no one bids any higher, the lender owns the home and you would receive nothing from the sale.
  
  There is no conceivable way that the lender would allow the process to drag out 5 years. The home was your father's and he was certainly within his rights to obtain a reverse mortgage so it's not a matter of "consumer protection". The loan is not a multi-generational loan and never was intended to be. As your father's heir, your choices are to pay off the loan and keep the property, sell the property or just walk away and let the lender worry about it and owe nothing.
  If there is still equity in the home, I would strongly suggest that you contact a real estate professional and look into listing the home as soon as possible but don't forget that you may have to go through probate if the property is not in a trust where you become successor trustee with the passing of your father.
  In that case, it may take a little time for the title to be transferred to you so that you can sell it. I would also strongly suggest that you consult with an estate attorney so that he/she can help you resolve all title issues as quickly as possible.
  Reply to Michael
Linda B.
July 2nd, 2019

My mother had a reverse mortgage, she has passed, and an heir wants to pay the 95% because it is less than the loan amount. A letter of intent has been sent to the reverse mortgage company and an appraisal has been done. We have been told by the reverse mortgage company that HUD will need to see proof of the loan amount and they will then need to approve it. If it is approved and once they are paid the amount does HUD or the reverse mortgage record documents with the recorder's office showing that the encumbrance has been paid so that we can go through probate to transfer the property?
Reply to Linda
- Michael Branson
  July 2nd, 2019
  
  Hi Linda,
  
  Typically, the title goes through the probate before the loan is repaid. Most heirs who are paying off the loan and taking the property already have the probate completed before they shell out the cash to pay off the existing loan. The reason for this is because most of the time there is a new loan being used to pay off the existing loan and that can't be done until the new owner has title.
  
  You have a chicken or egg situation here. If you plan to use financing to pay off the existing loan, the new lender will require you to be on title to be able to close a loan on the property. And yes, once you obtain title to the home, when you go to close the new loan, the servicer will issue a Beneficiary's Demand for the approved payoff to title that would be 95% of the value of the home that the new loan would pay off through the escrow.
  The existing reverse mortgage lender would record their reconveyance with the payoff while the new lender would have their lien recorded at the same time. If you tried to place a new loan on the property before the probate is completed, you would have to be able to pay off the existing loan with cash available to you as no lender is going to lend you money on a property for which you do not hold title.
  Having the reverse mortgage loan on the title would not stop the probation. If you are not sure what steps you need to take, I would strongly urge you to seek the assistance of an estate attorney to be sure you are not unnecessarily delayed in the process.
  Reply to Michael
Kathy S.
June 25th, 2019

I am a realtor with a client who has a reverse mortgage. He is 94 years old and in ill health, was forced to move. This is a short sale. He has moved out of the home and we are selling the home. The Buyer would like to move in prior to the final HUD approval on the short sale. Is this allowed?
Reply to Kathy
- Michael Branson
  June 25th, 2019
  
  Hello Kathy,
  
  I would not advise this course of action. Once the borrower leaves the home, it could trigger the lender calling the note due to the borrower's no longer living in the home as his principal residence. Would they, the depends on whether they intend to approve the short sale terms I would imagine but you have already stated that they have not been approved at this time.
  If the terms are not approved, I don't know what that would do to your transaction, i.e. if all parties would come back to renegotiate, if it would blow up your deal or what. At any rate, the move of the borrower and the occupancy of the home by someone else is a default under the terms of the existing loan and it is not an action I would advise.
  How long do you believe it will be until the terms of the transaction are approved? Do you know if HUD will approve them and if not, what is "plan B"? I would ask the lender if this is something that the buyer insists on to be sure that there is nothing that would throw a glitch into a positive completion of the sale.
  Reply to Michael
Janet C.
May 23rd, 2019

Hello, I am selling my parents' home with a reverse mortgage. I would like to switch realtors. I was told by reverse mortgage company I had to keep a for sale in front yard and keep a for sale listing on the MLS. My question is: When changing realtors, the ad on the MLS could be down a few hours, I have to wait for realtor to release his control of ad on Zillow. Can do this or will it put me in default?
Reply to Janet
- Michael Branson
  May 23rd, 2019
  
  Hello Janet,
  
  The reverse mortgage company cannot keep you from changing your representation. If you are concerned that there may be a slight delay in the new sign going up or the listing might be down for a few hours, then I suggest that you communicate to the lender what you are doing. Send them a copy of the new listing and let them know that you are making a positive change to facilitate a faster sale and you should be fine (assuming that your new listing price is reasonable for the property).
  Reply to Michael
Morris R.
May 19th, 2019

My mother entered into a reverse mortgage and at 92 years with dementia she is in default facing foreclosure for the amount of $215,000 the county appraised value is $190,000. I have power of Attorney and just received and offer of $254,000, seeing how 95% of the appraised value is $180,500 would I get to keep the remaining amount of $75,000 if I sell before the court date?
Reply to Morris
- Michael Branson
  May 20th, 2019
  
  Hi Morris,
  HUD allows heirs to pay off the loan at the lower of the amount owed or 95% of the current appraised value if they wish to keep the home. If you are selling the home, the payoff Demand would be issued at the amount owed which sounds like $215,000. Anything you receive above that amount does belong to your mom and her estate.
  Reply to Michael
Susan
May 13th, 2019

Who pays off the reverse mortgage if more is owed than the house would sell for?
Reply to Susan
- Michael Branson
  May 13th, 2019
  
  Hi Susan,
  
  HUD steps in an pays a claim. That is one of the reasons you have mortgage insurance on the government insured loans. On the private programs, they typically start with lower loans in relation to the value of the property but at any rate, there is never any recourse to the family or the estate of a reverse mortgage borrower. The lender can look only to the property for repayment of the loan.
  Reply to Michael
Hubert Price
May 10th, 2019

I have a reverse mortgage for 330,000 and my house is appraised at 538,000 and is in excellent condition. I've already listed it for sale and it is vacant. Do I have any responsibilities to my lender other than full payoff at closing. Insurance and taxes are, and have always been, current. Do I need to communicate with them in any way?
Reply to Hubert
- Michael Branson
  May 10th, 2019
  
  Good Afternoon Hubert,
  
  Not really, it will be just like any other loan that you pay off BUT there are two things to remember. Firstly, like any FHA loan, forward or reverse, interest is paid through the whole month no matter what day of the month you pay the loan off. So, if you are getting close to the end of the month do whatever you can to get everything coordinated so that the lender receives the payoff before the first of the next month.
  Otherwise, you will pay another month's interest and why pay it if you don't have to. Sometimes buyers, realtors and escrow companies/settlement providers are not as motivated to push to close a few days earlier if it looks like it won't close by month-end but it could save you a lot of money if you can and the difference is before the end of the month or a couple days into the next month.
  
  Secondly, reverse mortgage servicers typically quote 5 working days to produce a Beneficiary's Payoff Demand, and they usually use it! Don't let the title company or Settlement Provider (could be escrow or attorney as well) wait for the last minute to order that payoff Demand.
  It doesn't do any good to order the Demand months in advance and in fact would cost you more if the lender must update the Demand before closing, but if the Settlement Provider waits for the last minute the closing could be delayed. Especially since your home is vacant, the buyers may want to move the closing and it is in your best interest to accommodate such a request, but you might be stopped from doing so if the closing agent had not yet ordered the Demand.
  Remind them that you know the Demand may take the entire 5 working days (and could be even a day or two longer if anything comes up) and so if there is any chance at all of an earlier closing date, make sure that payoff statement is ordered on time.
  Reply to Michael
Deb
April 1st, 2019

We owe a balance of $135,000. So, buying our home had an in ground pool installed new HVAC. Home like ours are selling for around $260,000. We plan to see this house, pay off the balance and either rent or get a conventional loan. Do we have to have you do an appraisal before listing?
Reply to Deb
- Michael Branson
  April 1st, 2019
  
  Hello Deb,
  
  You can do the same as you would with any other home loan. You list the house and the title company or settlement agent will send to the lender for a Demand Request when they are ready for the payoff figure. The lender will send them the Beneficiary's Demand for Payoff and this is the amount required to pay the loan in full. When the home sells, the closing agent will pay off the existing lender from the proceeds and sent the payoff to them, pay all other third parties' due money as a result of the transaction and then the remaining funds will be paid to you -just like any other transaction.
  Reply to Michael
Bill
March 26th, 2019

I am looking into buying a home that the owner has a reverse mortgage on. The owner has been in the house for decades, and the house has appreciated in value. The price is set at $227,900. The seller's realtor informed us that the lowest that the seller was capable of going was $224,000 due to the reverse mortgage situation. What would be the consequence of making a lower offer/is there a "minimum" that the seller can sell the property for? It has been on the market at listing price for 180 days in a very popular market, which makes me think that the price is too high. Please advise!
Reply to Bill
- Michael Branson
  March 26th, 2019
  
  Hello Bill,
  
  You can offer anything you like, it will be up to the seller and their circumstances (of which I have no idea) if they will, or even can, accept your offer. Their response will likely depend on several things. If the borrowers are still in the property, the home is not yet lender owned (a foreclosure has not been completed) so there is no way to know if the "bottom line number" they are giving you is the actual amount owed or if that includes what they feel they need to walk away with from the sale.
  There are several questions I do not know currently such as is this really the bottom he is "capable of going" or that he is willing to go? And is capable meaning because he has a number, he needs to hit in order to have enough to sell, pay the realtor, and move or what? There is no minimum for which a seller can sell their home other than one they self-impose on the sale and whether the selling price would put them below the actual amount owed on the loan which would then require the lender/HUD approval. From what you have said, it really doesn't appear that this is a case of the loan amount being too high -but I do not know for sure.
  
  I would say that if you are serious about purchasing, make the offer you feel is fair and see where the chips fall! There are no consequences other than the fact that the seller may choose to not accept the offer and not even counter. I would also advise that you have a licensed real estate broker represent you in the transaction so that they can present other sales to the seller at the time to support your offer (or tell you in advance if your offer is unreasonably low). The commissions are paid by the seller in the listing fees so it does not cost you anything to have professional representation and I would highly suggest it. The licensed agent may be able to save some hard feelings by doing some advance research and present your case more convincingly if you are correct that the price is too high and the recent sales support that position.
  Reply to Michael
Leigh B.
March 26th, 2019

My parents have a house they may need to sell. The current appraisal is $315,000, but, the loan balance principle and interest are $435,000. What if they can get $400,000 for the property, who would get the net amount exceeding the appraisal price?
Reply to Leigh
- Michael Branson
  March 26th, 2019
  
  Hello Leigh,
  
  I really can't give you any advice here and I do strongly suggest that your parents consult with their tax advisor to determine possible benefits of selling vs just taking a larger loss on the home. I can't tell you what the additional sale price would or would not do for them when compared to just walking away from the home at a larger loss and they should probably check for their own protection.
  
  I can tell you that there is no "win fall" to be gained by selling the home at a higher price because the loan balance is higher than what would be paid off with the sale. As the heir, you can approach the lender when your parents are forced to move about paying off the loan for the amount owed or 95% of the appraised value, whichever is less. If you later sell the home for a larger sales price, that would be your right as the new owner and the reverse mortgage lender would not be involved in any future sales. If you believe that a higher sales price is possible, this is a way to approach the situation.
  Reply to Michael
JULIET HERRERA
March 17th, 2019

My father is currently in a rehab assisting facility.His home is in reverse mortgage.not sure if he will be back home.can I sell his appliances of his home.
Reply to JULIET
- Michael Branson
  March 18th, 2019
  
  Hello Juliet,
  
  Your dad has up to 12 months to return if he is out on a temporary medical absence. If he has not returned by then, the absence is considered permanent and the loan would become due and payable. When you say "Can I sell the appliances", I would caution you a bit. Firstly, if you sell the items that make the home habitable and the lender has a home inspection performed during this time, it would be obvious that you did not intend for your father to return and they would be within their authority to call the loan immediately due and payable. They are only required to wait 12 months for temporary absences but it you make it clear that you don't anticipate him returning, they would not consider it temporary either.
  
  Secondly, I would have to ask, which appliances? Free standing appliances like washer and dryer belong to your father and can be sold by your father or moved at his discretion. Build in appliances are considered real property though and could leave you or your father's estate open to possible liability if you were to take things like built in refrigerators, dishwashers, built-in microwaves and ovens, etc. As long as you are only talking about personal property, you or your dad can do whatever you wish but if you start taking real property out of the home, you could be open to issues later and that is not a question for me to answer.
  Reply to Michael
Arthur
October 19th, 2018

If i choose a deed in liu because I am underwater, and do not pay the NJ realty transfer tax, can the lender come after me for it?
Reply to Arthur
- Michael Branson
  October 19th, 2018
  
  Hello Arthur,
  
  I'm sorry but I am really going to have to refer you back to a real estate attorney to answer this for you. The loan is a non-recourse loan and the lender cannot look to any other asset other than the property to repay the loan. To determine the full extent of any liability you might have regarding taxes and other assessments which are not part of the loan, you really need to seek professional counsel to determine your rights and liabilities.
  Reply to Michael
Kevin
March 9th, 2018

My mother has an existing reverse mortgage. We are looking into moving her into assisted living. The value of her condo is about then same as the original loan amount (approx. 70,000). She has used about $20,000 of the credit line over the years. When we sell the condo, is she liable for the credit line that she used or is that included as part of the you are only responsible for the appraised value of the home at the time of selling?
Reply to Kevin
- Michael Branson
  March 9th, 2018
  
  Hi Kevin,
  I'm not sure I follow your question but I think I know where you are ultimately going so let me take a stab at it and if I don't answer your question fully, please don't hesitate to get back to us. The loan is a non-recourse loan which means that a borrower can never owe more than the property is worth. So in this case, if your mom's condo was worth less than the amount owed on the loan, she would never have to pay more than the property was worth. In this case though, I think you are telling me that your mom only used $20,000 of the total available to her and therefore, the property is still worth more than the amount owed. In this case, even if she has additional funds available to her, she only owes what she borrowed (plus any interest that accrued on that balance) and not the full amount of the line that was available to her.
  Reply to Michael
stacy
May 11th, 2017

my parents have a reverse mtge. and have now moved to assisted living. are they required to try to sell the house or can they walk away? mtge co. made it sound like it has to be on the mkt for 6 months. not sure we are getting correct info.
Reply to stacy
- Michael Branson
  May 11th, 2017
  
  Good morning,
  
  The reverse mortgage is a non-recourse loan. This means that the only recourse the lender has is the property itself and cannot look to other assets to resolve the debt. If your parents are no longer living in the home and they do not list the property for sale, if you notify the lender of these facts, their only recourse is to begin foreclosure proceedings - whether the property is listed or not. Whereas I cannot speak for them, I would think that they would be very happy with you if you were willing to allow them to take the property back with cooperation in a timely manner rather than forcing them to go through the whole drawn out foreclosure process. Either way, if you don't plan to sell it anyway, they are going to get the property back and the sooner they get it the less the cost. You may want to tell them that you are not interested in selling the home and offer them a Deed in Lieu of Foreclosure.
  Reply to Michael
L jespersen
February 5th, 2017

wondering if you can do a reverse more than once. we have a home with a reverse now. we want to sell and go to a smaller home. may we sell current home pay of existing reverse. take out another mortgage on the new smaller home and then do another reverse on the that new home?
Reply to L
- Michael Branson
  February 6th, 2017
  
  Hi Leslie,
  
  As long as you only have reverse mortgage at a time and they conclude with no loss to HUD, there is no limit on the number of reverse mortgages that you can have and you can get them one right after another.
  Reply to Michael
Addis
July 24th, 2016

Hi, I am planning to buy a house which is under reverse mortgage. I made an offer of $266000 (which was 95% of original appraised value of $280,000). The lender did the second appraisal before accepting my offer. The second appraisal came lower which was only $263,000. But, the lender accepted my offer price of $266,000 after second appraisal. Can lender sell the house for a price more than the appraised value?
Reply to Addis
- Michael Branson
  July 25th, 2016
  
  If the lender owns the property, that means the borrower and the borrower's heirs did not elect to keep the home. The 95% option is for borrowers and their heirs and does not apply to subsequent sales.Â
  Reply to Michael
Bob
June 20th, 2015

Hello, my parents are elderly and now must move with family due to health concerns. They live in florida and have a house with a reverse mtge that they have maxed out and pulled 162,000 dollars from. There house would realistically sell for around 160,000 plus closing costs of 12,000. So they end up around 12000 short at closing, which they dont have. Instead of a foreclosure situation is there an alternative? Should they notify the bank of the situation or just list it?
Reply to Bob
- Michael Branson
  June 22nd, 2015
  
  Hello Bob,
  I would definitely contact the servicer and let them know of your parents' failing health and the need to move. This will not be the first time they have had borrowers who have had to vacate their home due to health reasons and they will know how to advise you on the easiest and best way to proceed.
  Reply to Michael
ronald C
February 23rd, 2015

If I got a reverse mortgage and was able to sell the house for more than the loan, could I pay the loan off and keep the amount that is over the amount of the loan. Example, my loan is $150K and I sell the house for $200K, would I get to keep the $50K?
Reply to ronald
- Michael Branson
  February 23rd, 2015
  
  Hi Ronald,
  Absolutely! The equity in the home, just like the home itself, always belongs to you. You can sell the home at any time and there is never a prepayment penalty with a reverse mortgage.
  Reply to Michael
Stewart
October 6th, 2013

If a home owner with a reverse mortgage on the home wishes to sell the property do they have to obtain permission from the mortgage holder before putting the property on the market?
Reply to Stewart
- Michael Branson
  October 8th, 2013
  
  Hi Stewart,
  The owner of the home owns the house, not the mortgage holder! The owner(s) decide when to sell the house and do not need any permission from the lender to do so. You get a monthly statement so you know how much you owe at any given time and therefore you have that information available to you when you meet with real estate sales people.
  Reply to Michael
Annette
September 6th, 2013

My mother got a reverse mortgage years ago. Recently, one of her grandsons offered to have her move in with him and his family to cut costs. Even without the mortgage, she was still struggling to pay her other bills. My sister has been in contact with the reverse mortgage company because she wants to buy it. The problem is a realtor told my mom it probably wouldn't sell for more than $100,000 because it needs a lot of repairs but the reverse mortgage company is telling my sister since my mom is still living any heirs that want to purchase the property for the full amount which is $160,000. There is no way we can obtain financing higher than the property will appraise. I would just let it go and let the bank deal with it but my sister doesn't want to let it go for sentimental reasons. Do you have any advice in handling this situation?
Reply to Annette
- Michael Branson
  October 8th, 2013
  
  Hi Annette,
  You have a situation that is not as clear as white and black here. The problem is that borrowers' families could begin moving all parents out of properties now that values are beginning to rise again now while they are still low and purchase the homes at 95% of current value if they were looking for an angle to make some money when the property values began to rise. I would advise you to work with the servicer and with HUD to defend your case of your mother having to move from the home, that this is not an effort to take advantage of current values and a rising market and make a case for yourselves. If they know your mom has to move out no matter what, they can only sell the property for fair market value so a sale now makes sense if it saves them costs, but by the same token, they have to protect themselves and HUD from those who would take advantage.
  Reply to Michael
Elizabeth Connor
July 29th, 2013

Hello - First let me say thank you for a great blog and sincere understandable responses. These issues are stressful and confusing and the resource you are providing is very helpful. Here's my situation. My mother had a reverse mortgage and passed away in January 2013. Because my siblings and I were told we had a year to decide what to do with the house, we made the mistake of not communicating immediately with the lender and discovered in late May that foreclosure proceedings had started in march! Fortunately, when we made contact with the lender in early June, we were told we could still sell the house. So, we found a trusted realtor , listed the house "as is" and received a few offers. The lender did an appraisal and recently accepted a cash offer well below the value of the loan, with a closing set for August 15. All seems well, but here are my concerns: 1) As an heir and administrator of the estate, what are my responsibilities at this point in the process? What will be required of me to complete this deal?
Next question: The deal may be shaky for two reasons: a) the lender is asking for a HUD settlement statement, which my realtor says she can't provide because of CT state laws, and b) Mother's 1910 house is in poor condition and will likely need repair work for plumbing, possible lead paint and asbestos. If this deal falls apart, can my siblings and I walk away from the property or will we need to continue trying to sell it? Thank you for any assistance you can provide.
Reply to Elizabeth
- Michael Branson
  August 5th, 2013
  
  Hi Elizabeth,
  A HUD Settlement Statement, otherwise known as a "HUD I" is simple the statement that is provided to every party whenever a transaction closes that details the transaction. It does not have to be a HUD insured loan for the Title Company or Attorney to issue a HUD I Settlement Statement. Most companies require both an estimated statement prior to close and then a final statement at closing. this should not create anyone any issues since all it will do is breakdown the entire transaction for the parties and show all fees and what money goes where.
  As for your further responsibilities, the reverse mortgage is a non-recourse loan. You have no further responsibility to the transaction and the lender cannot seek repayment from any of you, they can only look to the home for repayment of the debt. As for requirements of you to complete this deal, if the foreclosure is completed prior to the sale, then the lender can sell it without your involvement at all as they would then own the property. As it is now, you would only be required to assist with the final sale since the property is still under your control and ownership.
  Reply to Michael
A Hoffman
July 18th, 2013

Question: My husband and I are looking at a farm that is a reverse mortgaged property. The original borrower passed away a little over 6 months ago and the heirs are trying to sell it by doing a sale by owner. As prospective buyers, what steps should we take if we are interested enough to make an offer on the property. I fear that this is a bit more tricky than a regular house sale and do we need to watch to make sure the time does not go past 12 months? Any help would be greatly appreciated. Thank you.
Reply to A
- Michael Branson
  August 14th, 2013
  
  There really shouldn't be any additional issues for you to be concerned with other than the price/existing balance. The only thing you need to consider is whether or not the sale price covers, or more than covers, the amount owed on the current reverse mortgage. If not, then the lender will have to be involved in the process to be certain that they will accept the amount less than owed as payment in full. If the sale price more than covers the existing balance of the reverse mortgage and the property has not gone into foreclosure, the sale will transpire like any other sale.
  Reply to Michael
John
May 11th, 2013

Question: mother took a reverse morgage when the housing market was in free fall 2011 and this was the las vegas housing market, possibly hit the hardest. Her end is near has she is in hospice care. since 2011 the house has recovered some value. Loan is 85k I believe back then appraised at just 100k. Home now shows on interent worth 122k. Keep in mind in the 00's this house was valued well above 200k. Anyway, there is equity here. I only have a year, I have bad credit. Would a bank still give me a loan for the 85k based on the new apprasial value of 122k. No risk to them? Can i file chapter 13 and have five years to pay off 85k? Please advise
Reply to John
- Michael Branson
  May 21st, 2013
  
  Hi John,
  I can't advise you on the new loan, I do not originate any forward mortgages any more so I don't know what options you have there. You do own the house now though so the equity is yours and you can sell or refinance the home, whichever option is best for you. If credit is an issue and you want to keep the home, there have recently re-emerged several less than prime lending sources so you could start by contacting any one of them to see what their lending criteria is. I'm sorry, I don't work with any of them and I do not have a recommendation for you. I do wish you the best.
  Reply to Michael
Janet Fisher
May 1st, 2013

My mother passed away and had a reverse mortgage on the house and 2 of her 8 lots. We have recently learned the underground oil tank has leaked and needs removal, along with surrounding soil. Furthermore the well may be decommissioned. House has an infestation of post beetles. Long story short the reverse mortgage has a balance higher than the worth of the house and 2 lots. We want to walk away and let the bank take the house. However we are concerned her heirs will be liable for the oil tank removal and soil removal. Can the bank come back to the remaining property and take some of our proceeds when we sell off those extra lots? Can her estate be held responsible for the cost of dealing with that leaking oil tank?
Reply to Janet
- Michael Branson
  June 4th, 2013
  
  Hi Janet,
  You really should consult a real estate attorney licensed in the state where the property is located as I can't tell the whole scenario from your question. What I can tell you is that the HUD HECM reverse mortgage is a non-recourse loan meaning that the only recourse the lender has is the property which secures the loan. The bank cannot look to any other assets of the borrower or the borrower's heirs for repayment of the loan. How the lots are split and what constitutes the reverse mortgage property though I certainly cannot comment on and that is where the attorney will certainly be well-worth the time and investment.
  Reply to Michael
Mike
April 6th, 2013

we currently have a reverse mortgage and intend to sell our home in June 2013. We owe @
80,000. Our house value is @ 250,000. Our current available line of credit is @64,000. My question: After our lender gets 80,000 at settlement do they give us the current line of credit balance, or with the payment of the 80k, is the account closed and thus we get the 170,000 (difference between 250 and 80? thanks
Reply to Mike
- Michael Branson
  April 12th, 2013
  
  Hi Mike,
  It's just like any other loan at payoff. They don't give you any additional funds but you only pay off what you owe. In other words, you will pay off the new balance of $80,000 plus any additional fees and interest and then when you sell the home, you will keep the entire amount above and beyond the final payoff amount.
  Reply to Michael
B. L. Beardsley
February 10th, 2013

There are two different amounts on a conversion mortgage with FHA and the Bank. I did not know that at closing and that issue has been very troubling because there is a large descrepancy between the value of the home and the amount that Fannie Mae is evidently allowed to claim. The broker who misrepresented the loan numerous times has been reported to my State where he is licensed. So when this same individual called to inform me about the second contract the lawyer at my home never mentioned (Countrywide affiliated?) I was told not to worry about the descrepancy because Fannie Mae can record a contract that lists the maximum amount they can loan in my county but that I do not repay that amount. If this is the case, what is the purpose of this much higher amount? Later it was mentioned to me that Fannie Mae can decide not to require that amount. The entire reason I took this loan was to upgrade my home so that I could sell it and retire within 10 years because I live in a state where the taxes are so high many Seniors like myself cannot afford to continue to keep their homes. There is a cap now but that can be circumvented via a committee which operates on the State level. Such was the case for me this past year when the mayor wanted a 30 percent increase! And this is one of the reasons that Seniors that do not have a huge savings should forgo this type of loan. And it is important to remember that Fannie Mae's contract is the important one because of their requirements to change interest rates, allow banks to charge fees, equity that is used is the source of the nightmare charges, etc. A minimum of a CPA and an attorney (not a real estate attorney) should review the Fannie Mae contract and compare it to the bank contract before jumping off this cliff.
Reply to B.
joan keen
January 22nd, 2013

I have a reverse mortgage for $280000, the house has been assessed at $260000, I need to sell for health reasons, can I sell it for $260000 and then does the government insured reverse mortgage loan pay the difference to the lender.
Reply to joan
- Michael Branson
  January 29th, 2013
  
  If you have to sell your home and the loan balance is higher than the value of the home, the lender will also get an appraisal of the home and then will seek approval from HUD and then allow you to market the property for current value.
  Reply to Michael
Tonya
January 7th, 2013

I am looking at a house that has a reverse mortgage on it. Is it possible to do a rent to own on a reverse mortgage loan?
Reply to Tonya
- Michael Branson
  January 9th, 2013
  
  Hi Tonya,
  The existing reverse mortgage would become due and payable as soon as the original borrower sold the property or was no longer living in the home as their primary residence. for this reason, a rent to own sale would not work if you wanted to keep that financing in place during the rental period.
  Reply to Michael
Pace McNealy
January 3rd, 2013

My mother has a reverse mortgage. The value of the property is worth far less that the amount owed on the reverse mortgage. My mother has decided to sell the property to her daughters. The lender has agreed to accept the 95% appraised value. My question(s) is (1) Is this considered a short sell and will my mother received a 1099 showing the difference between the sell amount and the reverse mortgage amount as taxable income. (2) will her daughters be responsible for the balance of the mortgage?
Reply to Pace
- Michael Branson
  January 4th, 2013
  
  Good Morning,
  This is a great question and one that I can answer for you but one with which you should also follow up with a tax expert after you get the answer to see how it affects your circumstances. Firstly, the reverse mortgage is a non-recourse loan which means that the lender can only look to the property to settle the debt. This means that the daughters or anyone who purchases the property after your mom cannot be made to repay any balance of the loan that was not paid by your mother.
  The second part of this answer is where you need to consult a tax professional. The lender is required by the IRS to issue a 1099 to any borrower who pays less than the full amount due on their mortgage loan based on IRS regulations. I have spoken with servicing professionals and I have been informed that the 1099 that the borrower receives is the "1099 C" form and item #5 asks if the debtor was personally liable for the debt. Reverse mortgages are non-recourse loans and therefore, this item is not marked as "yes". This is where your tax professional can explain how that will affect your individual circumstances.
  However, there is good news for you. While the H.R. 3648, Mortgage Forgiveness Debt Relief Act expired on December 31, 2012, it is reported that The American Taxpayer Relief Act of 2012 that has just been signed into law (which is the fiscal cliff negotiations we have all been hearing about) has extended protection for borrowers of short sales and loan modifications from tax liability up to $2,000,000 until December 31, 2013. While I have not had the opportunity to read the entire legislation yet, it is reported to allow borrowers protection from taxation on "income" due to debt relief through the end of this year. Again though, before you make any plans or do anything, a consultation with a tax professional is always advised!
  Reply to Michael
Pam Heard
October 25th, 2012

My mother passed away a year ago and my sister, appointed Personal Representative, has had the house on the market. She has rejected offers claiming that they did not meet the 95% of appraisal value (I don't know if she actually presented the offers to the mortgage company or rejected them due to personal greed).

I just received a notice of foreclosure on the home. The judicial assistant from Probate Court informed that today my sister applied for a Deed in Lieu of Foreclosure.

What are my options to deal with this situation? I do not want this to impact my credit report. My sister has not communicated with other family members during the past year making all decisions.

Thank you
Reply to Pam
- Michael Branson
  October 29th, 2012
  
  Hi Pam,
  I'm sorry but I don't think I have enough information to make any recommendation here or maybe I don't quite understand the total picture. If you would like to give me a call and discuss this, I would be happy to see if I can shed some light on further options or if I need to refer you to competent legal counsel, but I can clear up a few things for you here.
  Firstly, if the current reverse mortgage exceeds the value of the home, then the lender with HUD's approval will determine what offer they will accept on a "short sale" as it will be less than the full amount owed on the mortgage. The lender (and HUD through the lender) will work with heirs of the borrower for as long as possible due to the fact that if they would only have to do the same steps as a diligent heir to sell the home. If your sister has received several very low offers, they may have been refused if the lender does a market survey and sees that other competing properties are selling for higher prices. If this is the case or if they have not seen any offers, sooner or later, they have to take the step of beginning foreclosure so that they can market the property themselves and finally sell it.
  If your sister approached the lender for a Deed in Lieu of Foreclosure, that is simply where the owner of the property signs the property back over to the lender so that the lender can take immediate title to the property instead of having to go through a foreclosure action. If your sister has been marketing the property and for the last year has been receiving only low offers, this could just be her was of giving this task back to the lender. You have to remember that the Deed in Lieu of Foreclosure is against the original borrowers, not you. So anything filed, whether it is a Deed in Lieu or a foreclosure will not affect your credit in any way.
  I'm sorry that you and your sister are not communicating, but I think you can rest easy that aside from possibly having to find a new place to live before you were ready, there will be no ill-effects on you due to this action.
  Reply to Michael
Randy Luebke
March 27th, 2012

One of my financial planning clients was told that in the State of Florida that reverse mortgage loans originated in that State are full recourse loans. I thought that all reverse mortgages were always non-recourse in all 50 States. Can you please set the record straight so that I can provide my client with the correct advice?

Thank you!
Reply to Randy
- Michael Branson
  March 28th, 2012
  
  Hi Randy-
  They are non-recourse loans and the Note and Deed specifically state that fact. Your customer gets a copy of the legal documents at time of application and can verify this for himself/herself prior to even returning the package to the lender. I will email you a sample copy :)
  Reply to Michael

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