Dear ARLO, I just returned from the hospital, where my uncle was transported by his neighbor, thinking he was having a heart attack.  My uncle said he almost passed out after receiving a letter from his reverse mortgage lender threatening to foreclose. I was told he may be discharged tomorrow, but I need to quickly step in to help him, a retired veteran.  Before wasting your time, I read some comments on this site and found a few similar ones, but I need clarification, so I am asking for help with a couple of questions.  Apparently, what triggered the threat to foreclose was my uncle put his home in a revocable trust a few years ago, naming his daughter trustee when he dies.  Two years later, the reverse mortgage lender sent a threatening letter.  I guess putting the home in a revivable trust is forbidden.  The notice to cure the problem in 30 days provided two options: Send the lender a copy of the trust for approval or revoke it. After looking at HUD rules, the easy solution is to revoke the trust, which I can do.  Do you agree to revoke, or do you know what kind of language should be in the trust to keep the lender off my uncle’s back?  Moving on, his wife abandoned the house with a reverse mortgage a long time ago, at least ten years ago.  She is a co-borrower, as is my uncle. When she left, he gave her a bunch of money, so she quitclaimed her part of the house to my uncle.  He recorded the quick claim deed.  Reading other comments posted here, it appears that it was ok for my uncle’s wife to quitclaim the property to my uncle, so the lender would have no grounds to foreclose, conditioned my uncle remains in the house.  Am I correct?  You gave similar advice to another person, but I want to double-check.  If I cured these problems for my uncle, I fulfilled my dad’s dying wish. I look after his brother.  One last question. If my uncle divorced his wife for abandonment, and he remains in the house, would the divorce be grounds to foreclose?  My questions may help others, so hopefully, your time to respond will not be wasted.  Your timely help will be greatly appreciated!

Hello Michael,

Let’s start with your second question first.  If your uncle was also on the loan from the start, there is no problem with the Quit Claim Deed, which placed 100% of the title into your uncle’s name.  The loan allows for the transfer as long as at least one original borrower is still on title and still lives in the home.  If he was on the original loan with his wife then, and she was not on the title by herself, there is no problem with that Quit Claim Deed that put the property in his name alone.

ARLO presents how to deal with the threat of reverse mortgage foreclosure

Reverse mortgages work for homes in a family trust

Having the home titled in a revocable trust or under your uncle as an individual is an “either-or” proposition.  There is no problem with him placing the property into a trust under the reverse mortgage program if he is the beneficiary of the trust, he is still occupying the property, and the trust meets HUD requirements.

The only thing I would have advised, though, is that you send the trust to the lender for review before changing the title because if they do not review and approve the trust, it is an unauthorized transfer of title which is forbidden under the terms of the loan.

Is your reverse mortgage lender allowing you to correct the issue by either putting the title back into his name or getting the trust approved?  That’s not terrible, but the question is how much time do you have, and what happens if the trust has some provisions that are not in line with HUD requirements?

Then you need to start amending the trust or changing the title later.  So, you need to decide what option you want to try to take now before too much time elapses or you get too close to the deadline to correct.

Suppose you choose to retitle into an individual. In that case, it’s not a matter of revoking the trust, and it would be a matter of recording another Deed to take the property out of the trust and deeding it to your uncle as an individual (but that does not affect the trust itself).

I assume (which is a bad thing, I know) that the trust allows your uncle the power he would need to sign a Grant Deed on behalf of the trust.  Most trusts these days meet HUD requirements, but if this trust was written so that it does not, you submit it for approval.

It needs revisions, and you may be on a tight timeframe to change the title later or amend the trust (in fact, you may only have a little time for corrections now if the trust needs changes).

Timeframe to act on a reverse mortgage

I hate to give you bad advice and would not want to make you jump through unnecessary hoops, but you must act promptly because the lender’s clock is ticking.  The fastest action you can take now to resolve your issue in the short term positively is to retitle the home into your uncle’s name as an individual.

That would mean preparing and recording a Grant Deed from the trust to your uncle.  I would strongly advise you to use a title company or attorney to ensure you do not trigger any tax reassessments, but this should be completed in a matter of days.

The title company or attorney can have someone personally pick up a copy of the recorded Deed transferring the title back to your uncle and send it to the lender via certified mail to be sure that they receive it (and I would probably send copies by fax and email as well with verification of their receipt and follow up with a call if it was me!).

After the dust settles and there are no more threats of foreclosure, if he wants the title back in the trust, he can send the trust to the lender for review at his leisure.  Once you have received the lender’s approval for transfer to the trust, the title can be returned to the trust with the lender’s blessing.

I hate the thought of doing all the extra back and forth, but I don’t know your timing and how many of the 30 days you have left, and I also don’t know how responsive your lender will be.

If you could reach them by phone and speak with someone the same day, explain the whole scenario, and send the trust to someone who could review it and get you an answer immediately, it might be better to send the trust before going through the back and forth outlined above.

If the trust were acceptable as is, you would not even need to do any title changes at all, but that makes me nervous, and you would need to make that decision based on how comfortable you are with the answers you get and how quickly you are able to get them.

I would be especially concerned if you were already a week or more into your 30 days and could not speak with someone who can give you assurances that they will work with you on this.  I would also request it in writing (possibly by email).

Authorizing a family for servicing is recommended

My suggestion is that you have your uncle write a letter that authorizes you to speak to the reverse mortgage company on his behalf about the loan.  They will not talk to you about the loan without his signed authorization.

He can really use your help now if this is causing him that much anguish and he may need it again in the future, so it would be best if they had such an authorization on file.

This is another area that concerns me because I am afraid you won’t be able to get the answers you need until after you are able to send them the authorization letter, and that chews up more time that you don’t have.

Unless the lender already has a letter of authorization on file allowing you to speak with them on his behalf, I would venture a guess that you need to do whatever you feel will resolve the issue quickly and with the least amount of frustration at this point.

You can always work on the long-range plan afterward when there is no threat or concern about foreclosure.

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