Hello ARLO – My father passed away in October 2018. He had a live-in caretaker for several years. I decided to sell the house in California, while the caretaker is occupying the home to keep the property safe and away from squatters and facilitate the viewing.
One offer from a buyer fell through and the caretaker approached my agent wanting to put in an offer and Celink has been working on the short sale approval on his offer for 2 months, with very little communication and feedback.
The appraisal from the lender was already done in September, and supposedly is waiting for HUD/Owner approval. Meanwhile, the trustee sale is scheduled for January 3rd, 2020. This past Friday Celink said that the “client”, whom I assume is HUD or whoever bought the note, that IF the sale/escrow can be completed by December 30, 2019, they are ok with approving.
Being a holiday month, it is unlikely that the buyer/caretaker will be able to open escrow and close by the 30th of December. If the property is sold at auction on Jan 3rd. how much time does the buyer (who has been a long time resident) must vacate the home. He wants to make sure that he will have enough time to find another place to live and take his personal property acquired over the years.
He is also a senior with mobility challenges. If it forecloses on the 3rd, what is the time frame for him to vacate? Also, if no one bids on the trustee sale, does he have a longer time period to move out? He is apprehensive that if his escrow is delayed, he will have even less time to find something suitable. Would Celink postpone the trustee sale beyond the 3rd? Thank you, Emmy
I can answer your question about possible foreclosure issues regarding the loan, but as far as the possible timeframes and rights of a third party vacating the property if the reverse mortgage ends in foreclosure sale, you would need to consult with an attorney in the area.
That would be a legal issue separate from the reverse mortgage and there are many factors that can play a role in eviction that I simply cannot answer for you.
But about the timing of the foreclosure sale, the lender can postpone a foreclosure sale if they so choose.
Celink is the lender’s/HUD’s servicer and they are acting on behalf of the lender; they would not make that decision on their own.
That is why there are delays at times, they really do need to obtain approvals for certain actions.
But if the buyer is close to closing at the end of the month, he should communicate with Celink and, while I cannot commit anything for them, I am fairly confident that they would be willing to grant a small extension to allow for the loan to close.
In fact, I would say that it would be a very good idea for him to give Celink regular updates as the loan progresses so there is no question of his intent or his ability to qualify.
You need to remember that a good lender CAN close a loan between now and December 30th if the borrower qualifies (it is a tight timeframe with the holidays, but it is possible).
If the loan is approved and just a day or two away from closing at the end of the month, their priority is for the loan to be repaid and that is what they would push for.
If however they do not see a close date in sight (you get to December 30, 2019 and there is no loan approval yet), the lender or HUD must make the decision whether to wait for a close (that may never come) or proceed with the foreclosure.
Remember, it’s already been more than a year since the borrower left the home and HUD is still incurring losses on the loan since interest continues to accrue and sooner or later, they must cut their losses.
It seems to me that if the caretaker is purchasing the property, he needs to be working diligently on closing the loan and if he really thinks he will not be able to close a loan to purchase, he should be making that assessment now.
I do not know what the law will allow for eviction times after the foreclosure is completed if he waits until then to move but there is no stated forbearance period of which I am aware for occupants of properties once a lender has foreclosed and the Trustee’s Deed has granted title to the lender.
I would believe that unless there is some legal reason to extend the time, things would move quickly from that point.
Again though, your best option is to consult an attorney for legal advice to be certain of the laws and rights in this case.
Top 5 FAQs
What happens when reverse mortgage owner dies?
The heirs have the option to pay off the loan (at the lower of the amount owed or 95% of the current market value of the home) and keep the home, sell the home, and keep the proceeds or let the lender take the home and owe nothing to the lender.
Can heirs walk away from reverse mortgage?
Yes, heirs can walk away from a reverse mortgaged home. The loan is non-recourse which means that the lender’s only security is the property.
We encourage all heirs to compare the balance owed on the borrowers’ most recent statement to the probable value as expressed by a local real estate professional though to make sure they are not walking away from equity that belongs to them or their family’s estate.
Can you buy back a house that has a reverse mortgage?
You do not need to “buy it back”, the borrower and/or their heirs always own it. The reverse mortgage is a loan just like any other loan.
The loan may be repaid at any time without penalty and the home remains the property of the owner or their heirs.
How long does it take to foreclose on a house with a reverse mortgage?
The foreclosure timeframe for a reverse mortgage is the same once the Notice of Default has been filed as with any other loan as prescribed by local laws.
The actual time it takes depends on the state in which the property is located but can take as little as 150 – 180 days in a Trust Deed state from filing to over a year in a judicial foreclosure state that must go through a court foreclosure.
Any individual, borrowers or their heirs facing a foreclosure action should seek legal assistance to determine the foreclosure laws in their area and their rights and obligations under the law.
How long can a caretaker stay after owner dies with a reverse mortgage?
This is a tough question to answer. If the owner has heirs who want to sell the home or move in, they could begin an eviction process almost immediately and then it would be up to the individual laws in your area to determine your rights to remain before you must vacate.
If no heirs come forward to claim the property, the lender would not be able to remove an individual from the property until they owned the home and that could not be completed until after a foreclosure action which could take 5 months or longer.
At any rate though, you need to realize that eventually there will be a new owner and unless they keep the home as a rental and you are able to decide with the new owner to continue to rent from them, you will need to move.
It would make sense to start planning for that eventuality early on.
ARLO recommends these helpful resources:
- Single Family Foreclosure Policy and Procedural Changes for HUD Title II Forward Mortgages and Reverse Mortgages
- Steps for Heirs – How to Repay Reverse Mortgage After Death
- Reverse Mortgage After Death: What Heirs & Family Must Know
- My Forbes Article “How Heirs Should Handle A Reverse Mortgage After Death”