Rialto, CA · Member since 2013 · 22 posts · 1 vote
I have a question and I hope someone can help. The executor of the Estate found out mother had a reverse mortgage on it and the lender didn't give any information or tell the executor of the estate had any options on saving his mother's estate so he had to make a touch decision to do a short sale on the house. My question is What option's does the executor of the Estate have in order to save his mother's house? If the Lender does not participate in Keep your home California what other route can he have?
Correct me if I'm wrong, but what I think @Wayne Brooks is saying, is that the borrower does not have options like "Keep your Home" or bankruptcy, because the borrower is deceased. Usually lenders give the heirs a window to pay off the loan.
Wayne, I've never done a short sale with a reverse mortgage. Is it largely the same as a short sale on a regular mortgage?
I imagine the short sale will complicate the heirs ability to buy the property short as the lender will require an arm's length transaction. If this wasn't a short sale and there was equity in the property, it may be possible to find an investor to purchase it and sell it back to the family. But if there were equity in it, it would also be easier for the heirs to secure a loan to take out the reverse mortgage.
Why are the heirs doing a short sale instead of turning over the keys and walking away? Because they like some real estate agent? These loans don't have recourse on the estate.
A reverse mortgage is a lien on the home. If there is no co-borrower — or the co-borrower is also dead or no longer living in the home — the loan comes due when the borrower dies. The heirs will only inherit the home itself if the reverse mortgage balance can be paid off without selling the property. To accomplish that, the heirs would have to pay off the balance with cash from the estate or another source, or take out a new loan.
On a non reverse mortgage, the bank is required by law to allow the heirs 2 options. 1.) The heirs would have the opportunity to become "financially responsible" for the existing mortgage, as it stood upon death of borrower. 2.) The heirs have the opportunity to independently secure a new loan on the property.
My instinct is to get the original reverse mortgage loan documents and have an attorney review them.
I looked at my first reverse mortgage loan a month or 2 ago, and they are very different from a regular mortgage. In every circumstance I am aware of there were money issues that led to doing a reverse mortgage. You cannot just start making payments after the owner dies in a reverse mortgage. The one I read had the total amount coming due. No payments appeared to be allowed. There were protection rules for a surviving spouse, but they did not give much time to payoff the loan. Usually these types of loans are the last resort for retired folks.
@Marissa Barrios, sorry to hear that your mom spent all your inheritance. If the Lender lent out more than the house is worth, looks like they now get the house. My guess is it's their accrued (high) interest that tipped the balance over?
Any recourse against Lenders practicing predatory behaviour? All the best...
In essence, it's a big balloon payment and cannot be 'cured'.
The lender or servicer typically allows family 6-9 months to open probate and gain sufficient powers to sell or refinance with another lender.
If there's a great deal of equity, it would make financial sense to spend the money for probate. Perhaps the decedent did some estate planning and subsequently transferred title to a family trust in order to avoid probate cost and court inconveniences.
I've been dealing with reverse mortgages in foreclosure for many years. Most don't have enough equity for my executor and administrator loan programs so the families have to weigh the benefits of opening probate and selling or just waiting for the lender to eventually complete foreclosure sale.
@William Hochstedler The short sale process for a RM is actually simpler, but not necessarily easier to affect. Ther's no borrower qualifying of course, but the house must be sold for at least 95% of a current FHA appraisal. Never seen a RM DIL, but those would make the most sense since there's no incentive to go through the short sale process for the heirs, except that it should be quicker to get it resolved.
Let's be clear on RMs; At the time it closed, ALL the equity was made available to the owner of record, ergo there's ZERO equity at that time. Then at the time of demise of the last person on the title, the RM comes due. Equity? Perhaps none to trivial depending upon property value appreciation at this time. Any existing Will or Trust is preempted and the note is called. The only choices left is to bid on the home at the auction or attempt a short sale (which is not working in this case).
While it seems cruel, mom & dad worked for it and should enjoy their retirement even if it means the kids can't inherit the home in which they were raised. There's no free lunch and the defacto concept of entitlements is just not found in the real world (sorry for the sermon).
In essence, it's a big balloon payment and cannot be 'cured'.
The lender or servicer typically allows family 6-9 months to open probate and gain sufficient powers to sell or refinance with another lender.
If there's a great deal of equity, it would make financial sense to spend the money for probate. Perhaps the decedent did some estate planning and subsequently transferred title to a family trust in order to avoid probate cost and court inconveniences.
I've been dealing with reverse mortgages in foreclosure for many years. Most don't have enough equity for my executor and administrator loan programs so the families have to weigh the benefits of opening probate and selling or just waiting for the lender to eventually complete foreclosure sale.
She avoided probate and that clearly states on her Last Will and Testament. Trying to do whatever it takes to try and save the home since my family has nowhere to go. Thank you everyone for all the great responses but I just wish they would change the way reverse mortgage works towards the heirs
Let's be clear on RMs; At the time it closed, ALL the equity was made available to the owner of record, ergo there's ZERO equity at that time. Then at the time of demise of the last person on the title, the RM comes due. Equity? Perhaps none to trivial depending upon property value appreciation at this time. Any existing Will or Trust is preempted and the note is called. The only choices left is to bid on the home at the auction or attempt a short sale (which is not working in this case).
While it seems cruel, mom & dad worked for it and should enjoy their retirement even if it means the kids can't inherit the home in which they were raised. There's no free lunch and the defacto concept of entitlements is just not found in the real world (sorry for the sermon).
I respectfully disagree. I've done over 70 RM probate deals and looked at many hundreds of others.
Yes, MOST borrowers sucked every bit of equity out of their homes, but not ALL did so.
Most of the RM's are written as HECM with a LOC feature, much like a HELOC line of credit. However, not every borrower uses all their credit nor does the accrued UPB take up all the equity.
The reasons for this are many, but typically due to fiscally conservative nature of many borrowers who grew up in the pre-war depression-era having scarcity fears and scarred memories.
That's why each case must be examined and best choices and limited options weighed.