Reverse Mortgage Short Sale Questions???
Chattanooga, TN · Member since 2012 · 12 posts · 0 votes
I have an executor who would prefer to sell to me rather than pay for listing. The reverse is about 100K over market value in current condition. He wants to be able to pay off the grandchildren named in the will too. Can anyone share their insight on the short sale of reverse mortgages? I've been told they are easier to do than regular mortgage, but do all the same rules apply when it comes to the families being able to walk away with some cash? Things change every week in this industry, I'm just looking for the most up to date knowledge I can find so as not to steer anyone wrong.
K. Marie just posted some insight on the underwater RM stuff in another thread recently, take a look here.
Find an experienced short sale agent, preferably one who has done a reverse mtg. An appraisal must be paid for, and HUD will accept 95% of the appraisal. I don't think there is generally relocation money, as the owner will either be deceased, or moved out of the property. The estate doesn't pay the listing/realtor fees as that is built in and paid by HUD. Without one, if allowed, they will still require 95% of appraisal. Also, the trustee can pick you, it doesn't have to be widely marketed, or be an arms length transaction, they just require 95% of appraisal.
How is he possible going to pay off anyone if this is a short sale? Where would any cash to pay anyone come from?
A reverse mortgage? He's getting his equity paid to him, there is no short sale. If the mortgage actually the value of the annuity is greater than the home value, well good for him, he better not sell as he'll be repaying the annuity off.
A reverse mortgage is not a real estate mortgage loan so much as an annuity purchase arrangement, there is no short sale available.
I suggest you Google "Reverse Mortgage". :)
This topic was double posted. I don't know if you can combine.
There are short sales on reverse mortgages. A detailed answer is in the other post.
I've combined the threads, @Wayne Brooks
I assume that if the executor is saying it is $100K underwater that the money was actually taken by the decedent or someone. So, the balance on the reverse mortgage is $100K more than what the house will bring on a sale. I'm not sure this is really a short sale. Nobody is on the hook for this balance. The executor just has to sell it and the lender gets whatever it nets from the sale. Done deal. They have no right to go after anything else.
I just don't see where any money that would go to the kids would come from. If the house sold for more than the balance on the reverse mortgage they estate would get that excess and that could be distributed. But that's not the case. They may have thought they had an inheritance coming. But grandma or grandpa spent that money already.
@Wayne Brooks, Thank you. I don't know that it is HUD but I do know a very good short sale agent who knows about reverse mortgage shorts, so I have already sent out an inquiry. I thought I would ask the community as well. Never hurts to have more information.
Thanks to all.
All reverse mortgages are HUD/FHA insured. They have a very specific short sale process, easier than most.
Well, please post it! I understand the govt insured side, as to receiving the money, so, like to see it. I have not been involved in Reverse Mortgages, besides the concepts I may be learning with you! So, by all means, a short on a RM, are they not paying out the rest of the annuity payments, is it to the deficiency owed from a sale (most likely is my guess)? :)
@Wayne Brooks, Thank you.. I have been told the reverse mortgages are the easiest shorts to get done.. I did not know they were all HUD or FHA.
K. Marie just posted some insight on the underwater RM stuff in another thread recently, take a look here.
Each servicer has their own short sale forms and packages. The link below is to HUD FAQ pdf that addresses requirements for reimbursement to servicers. It covers shorts, DIL's and resale after foreclosure. As long as the servicer follows the procedures, along with only allowing customary closing costs, and the property is sold for 95% of appraisal, whether by short sale or sale by the servicer following a foreclosure/DIL, the servicer gets paid in full and everybody else(including the mortgagee) gets a free pass (except for the rest of us tax payers of course).
http://portal.hud.gov/hudportal/documents/huddoc?id=hecm-svg_faqs.pdf
Usually the "short sale" is after the mortgagor dies, and done by the heirs. But apparently, the mortgagor can do it at any time and still get a free pass. I assume the shortage is most attributable to large upfront lump sums, then a smaller annuity stream, at the bubble valuations of course. A system set up to surely bleed huge amounts of money.
I'm not a short sale expert by any means, but I've paid off many reverse mortgages. In the original post, reference to an executor implies two things to me: 1) That this person has been appointed and has the power to sell now; 2) That this not a trust, or they would be the trustee/successor trustee.
What you don't need to worry about is the type of reverse mortgage. Most are Lines of credit, not used to fund annuities, anyway.
I'll bet that RM lenders respond positively to paying a broker fee of some kind. That means that an agent experienced in short sales is indispensable.
My understanding of short sales is that lenders still limit the cash proceeds to seller. What I don't know is if lenders will voluntarily agree to pay attorney and executor's statutory admin fees without getting a court order forcing same.
So, a seller (executor, administrator, trustee or successor trustee) may just have to be satisfied with the typical $1,000 game show type loving parting gift.
I have not done any Reverse Mortgage Short Sales, but I believe they are all serviced under HUD guidelines. When I looked into it, I beleive it said the estate had 6 months to sell the property. Search the HUD.gov website and you should be able to find details on the process.
Each servicer has their own short sale forms and packages. The link below is to HUD FAQ pdf that addresses requirements for reimbursement to servicers. It covers shorts, DIL's and resale after foreclosure. As long as the servicer follows the procedures, along with only allowing customary closing costs, and the property is sold for 95% of appraisal, whether by short sale or sale by the servicer following a foreclosure/DIL, the servicer gets paid in full and everybody else(including the mortgagee) gets a free pass (except for the rest of us tax payers of course).
http://portal.hud.gov/hudportal/documents/huddoc?id=hecm-svg_faqs.pdf
Usually the "short sale" is after the mortgagor dies, and done by the heirs. But apparently, the mortgagor can do it at any time and still get a free pass. I assume the shortage is most attributable to large upfront lump sums, then a smaller annuity stream, at the bubble valuations of course. A system set up to surely bleed huge amounts of money.
Wayne, if my understanding correct, reverse mortgage is "federally backed", but they are not directly taking money from federal tax dollars but from mortgage insurance premium.
@Maurice George, whether you're right or not doesn't affect the original Owners. If the Lender is unhappy because their golden goose stopped laying eggs, too bad for them, right? But as with any short sale, it's the Owners (and particularly their heirs) who end up with no cash in their pockets from the sale.
[This adapted from a Wizard of Id cartoon: If the Owner while alive received more from their Lender than they have to give back after they die - then the Owner won!] Cheers...
@Maurice George, whether you're right or not doesn't affect the original Owners. If the Lender is unhappy because their golden goose stopped laying eggs, too bad for them, right? But as with any short sale, it's the Owners (and particularly their heirs) who end up with no cash in their pockets from the sale.
[This adapted from a Wizard of Id cartoon: If the Owner while alive received more from their Lender than they have to give back after they die - then the Owner won!] Cheers...
Huh? In most reverse mortgage short sale cases, owner already took way more money from the house than the house worth. Why they still expect money from a short sale? Frankly, if a homeowner can find an agent who can help them short sale the property, assist them moving, and handling all stress, it is already a free bonus. Sometimes, because there are some credit card judgments or tax liens on the property, buyer has to pay those liens. Yes, it is not giving money to the seller, but seller are saving a lot of money as well. What else can you expect?
For reverse mortgage lenders/investors, they do not care at all. They will get money anyway because they are fully reimbursed by FHA for every penny they spend.
Each servicer has their own short sale forms and packages. The link below is to HUD FAQ pdf that addresses requirements for reimbursement to servicers. It covers shorts, DIL's and resale after foreclosure. As long as the servicer follows the procedures, along with only allowing customary closing costs, and the property is sold for 95% of appraisal, whether by short sale or sale by the servicer following a foreclosure/DIL, the servicer gets paid in full and everybody else(including the mortgagee) gets a free pass (except for the rest of us tax payers of course).
http://portal.hud.gov/hudportal/documents/huddoc?id=hecm-svg_faqs.pdf
Usually the "short sale" is after the mortgagor dies, and done by the heirs. But apparently, the mortgagor can do it at any time and still get a free pass. I assume the shortage is most attributable to large upfront lump sums, then a smaller annuity stream, at the bubble valuations of course. A system set up to surely bleed huge amounts of money.
Wayne, if my understanding correct, reverse mortgage is "federally backed", but they are not directly taking money from federal tax dollars but from mortgage insurance premium.
Yes, RM’s are insured by fha....fha reimburses the lender, as long as they follow the guidelines. Not sure why that distinction makes any difference.
Each servicer has their own short sale forms and packages. The link below is to HUD FAQ pdf that addresses requirements for reimbursement to servicers. It covers shorts, DIL's and resale after foreclosure. As long as the servicer follows the procedures, along with only allowing customary closing costs, and the property is sold for 95% of appraisal, whether by short sale or sale by the servicer following a foreclosure/DIL, the servicer gets paid in full and everybody else(including the mortgagee) gets a free pass (except for the rest of us tax payers of course).
http://portal.hud.gov/hudportal/documents/huddoc?id=hecm-svg_faqs.pdf
Usually the "short sale" is after the mortgagor dies, and done by the heirs. But apparently, the mortgagor can do it at any time and still get a free pass. I assume the shortage is most attributable to large upfront lump sums, then a smaller annuity stream, at the bubble valuations of course. A system set up to surely bleed huge amounts of money.
Wayne, if my understanding correct, reverse mortgage is "federally backed", but they are not directly taking money from federal tax dollars but from mortgage insurance premium.
Yes, RM’s are insured by fha....fha reimburses the lender, as long as they follow the guidelines. Not sure why that distinction makes any difference.
Wayne, you suggested taxpayers will reimburse for the difference. Not the case I guess.
Each servicer has their own short sale forms and packages. The link below is to HUD FAQ pdf that addresses requirements for reimbursement to servicers. It covers shorts, DIL's and resale after foreclosure. As long as the servicer follows the procedures, along with only allowing customary closing costs, and the property is sold for 95% of appraisal, whether by short sale or sale by the servicer following a foreclosure/DIL, the servicer gets paid in full and everybody else(including the mortgagee) gets a free pass (except for the rest of us tax payers of course).
http://portal.hud.gov/hudportal/documents/huddoc?id=hecm-svg_faqs.pdf
Usually the "short sale" is after the mortgagor dies, and done by the heirs. But apparently, the mortgagor can do it at any time and still get a free pass. I assume the shortage is most attributable to large upfront lump sums, then a smaller annuity stream, at the bubble valuations of course. A system set up to surely bleed huge amounts of money.
Wayne, if my understanding correct, reverse mortgage is "federally backed", but they are not directly taking money from federal tax dollars but from mortgage insurance premium.
Yes, RM’s are insured by fha....fha reimburses the lender, as long as they follow the guidelines. Not sure why that distinction makes any difference.
Wayne, you suggested taxpayers will reimburse for the difference. Not the case I guess.
FHA self insures their loans, they suffered severe losses after 2007, they are federally funded....yeah, we paid for it.
@Maurice George, whether you're right or not doesn't affect the original Owners. If the Lender is unhappy because their golden goose stopped laying eggs, too bad for them, right? But as with any short sale, it's the Owners (and particularly their heirs) who end up with no cash in their pockets from the sale.
[This adapted from a Wizard of Id cartoon: If the Owner while alive received more from their Lender than they have to give back after they die - then the Owner won!] Cheers...
Huh? In most reverse mortgage short sale cases, owner already took way more money from the house than the house worth. Why they still expect money from a short sale? Frankly, if a homeowner can find an agent who can help them short sale the property, assist them moving, and handling all stress, it is already a free bonus. Sometimes, because there are some credit card judgments or tax liens on the property, buyer has to pay those liens. Yes, it is not giving money to the seller, but seller are saving a lot of money as well. What else can you expect?
For reverse mortgage lenders/investors, they do not care at all. They will get money anyway because they are fully reimbursed by FHA for every penny they spend.
You wrote "In most reverse mortgage short sale cases, owner already took way more money from the house than the house worth", but I disagree. Mostly, the Owners just ACCUMULATE INTEREST PAYABLE over the years, which is only paid on completion of the Contract (often when the Owner dies). ie. The original Loan would have been for a fraction of the home valuation. ie. Compound Interest works in the Lenders' favor. If the Loan includes ongoing monthly payments to the Owner, then that original "fraction" would be even smaller.
You also wrote "Yes, it is not giving money to the seller". So, we agree, right? Cheers...
@Maurice George, whether you're right or not doesn't affect the original Owners. If the Lender is unhappy because their golden goose stopped laying eggs, too bad for them, right? But as with any short sale, it's the Owners (and particularly their heirs) who end up with no cash in their pockets from the sale.
[This adapted from a Wizard of Id cartoon: If the Owner while alive received more from their Lender than they have to give back after they die - then the Owner won!] Cheers...
Huh? In most reverse mortgage short sale cases, owner already took way more money from the house than the house worth. Why they still expect money from a short sale? Frankly, if a homeowner can find an agent who can help them short sale the property, assist them moving, and handling all stress, it is already a free bonus. Sometimes, because there are some credit card judgments or tax liens on the property, buyer has to pay those liens. Yes, it is not giving money to the seller, but seller are saving a lot of money as well. What else can you expect?
For reverse mortgage lenders/investors, they do not care at all. They will get money anyway because they are fully reimbursed by FHA for every penny they spend.
You wrote "In most reverse mortgage short sale cases, owner already took way more money from the house than the house worth", but I disagree. Mostly, the Owners just ACCUMULATE INTEREST PAYABLE over the years, which is only paid on completion of the Contract (often when the Owner dies). ie. The original Loan would have been for a fraction of the home valuation. ie. Compound Interest works in the Lenders' favor. If the Loan includes ongoing monthly payments to the Owner, then that original "fraction" would be even smaller.
You also wrote "Yes, it is not giving money to the seller". So, we agree, right? Cheers...
Brent, there are different kind of HECM programs. In many situations, HECM interest is only like 1.6x% or 1.8x% while some programs in some situations have 5.xx% interest. If you get a good interest, the balance is not accumulating that much. Also, the benefit of HECM is as long as you pay property tax, insurance and keep this as your primary residence, reverse mortgage company cannot foreclose your property until all borrowers and eligible non-borrower spouse (Common law marriage won't work. There is a case in my town about this rule) passed away.
Per HECM laws, if property owner do a short sale, buyer cannot give money to the seller. However, HECM law allows buyer to pay liens attached on the property as long as the payment properly disclosed to the bank (eg, on HUD-1). If a property owner have 40K IRS lien on a 700K property with 950K HECM mortgage balance, would you believe a property owner will glad to say Yes? (1) Someone will pay his/her 40K IRS lien. (2) A family member of his/her can list his/her property and get 3% real estate commission. 21K (3% of 700K) is not a lot of money in Del Mar, CA or Manhattan, but it is still a decent amount in my town (3) Property owner can walk away free (Non-recourse). I would glad someone will make IRS never bother me again.
@Maurice George, you wrote "HECM law allows buyer to pay liens attached on the property as long as the payment properly disclosed to the bank (eg, on HUD-1)", but I ask: Why would a Buyer volunteer to pay any liens (on top of the purchase price agreed)? [But, if payment of said liens is made as part of the agreed purchase price ie. forced by the Lienholder/s, then your point is moot, right?]
But I do agree that it is interesting when you say the Owner can force the the Buyer (in a roundabout way) to end up paying the Owners' representative 3% of the value of short sales. I would have thought that laws were worded so that even 3% Commission was completely "at arms length" ie. leaving no possibility of letting the Owner get ANY revenue from a short sale. Not so?
Per your last sentence, good luck with the IRS in your circumstance. Cheers...
@Maurice George, you wrote "HECM law allows buyer to pay liens attached on the property as long as the payment properly disclosed to the bank (eg, on HUD-1)", but I ask: Why would a Buyer volunteer to pay any liens (on top of the purchase price agreed)? [But, if payment of said liens is made as part of the agreed purchase price ie. forced by the Lienholder/s, then your point is moot, right?]
But I do agree that it is interesting when you say the Owner can force the the Buyer (in a roundabout way) to end up paying the Owners' representative 3% of the value of short sales. I would have thought that laws were worded so that even 3% Commission was completely "at arms length" ie. leaving no possibility of letting the Owner get ANY revenue from a short sale. Not so?
Per your last sentence, good luck with the IRS in your circumstance. Cheers...
Brent, in HECM short sale situation, bank will not pay any liens on the property from proceeds, but bank will allow buyer to pay those liens as long as it is properly disclosed to the bank (on HUD-1).
Also, please do not distort what I said. I said seller can choose his/her own agent in a short sale transaction as listing agent. He/she can choose his/her close friend as the listing agent (must be licensed obviously). Of course, this arrangement must be consulted with the bank before the short sale process started. If bank rejected this idea, then, seller may need to choose another realtor. If Bank approve this arrangement, it must be disclosed entirely in writing to buyer as well as the bank before bank issue the short sale approval.
@Maurice George, if I'm distorting what you said, then you must have meant that the Owner can in no way benefit from a short sale, right?
In which case, that's what I've said all along. You can't have it both ways!
eg. If the Owner's friend gets the 3% Commission, how can that help the Owners or their heirs? [Be very careful how you answer that question].
As for Buyers volunteering to pay any Liens not paid out by the Bank, I ask again: why would they volunteer? That's not credible. But my main point about that is: So what if the Buyer does volunteer? It's obvious from your posts that those Lienholders had no recourse anyway, so the Owner is not impacted in any way. Cheers...
@Maurice George, if I'm distorting what you said, then you must have meant that the Owner can in no way benefit from a short sale, right?
In which case, that's what I've said all along. You can't have it both ways!
eg. If the Owner's friend gets the 3% Commission, how can that help the Owners or their heirs? [Be very careful how you answer that question].
As for Buyers volunteering to pay any Liens not paid out by the Bank, I ask again: why would they volunteer? That's not credible. But my main point about that is: So what if the Buyer does volunteer? It's obvious from your posts that those Lienholders had no recourse anyway, so the Owner is not impacted in any way. Cheers...
Brent, I already said the benefits several times. Since you did not get it, let me say it again.
1. Buyer must pay liens attached on the property. No HECM short sale transaction can go through without paying off the liens attached on the property. Of course, the lien payoff must be disclosed to the bank in writing (eg, show on HUD-1) and bank must approve this payoff. The lien payoff amount is in addition to purchase price. For buyers, they must put lien payoff amount in their calculation. If they believe payoff lien plus short sale purchase price will not work, then there will be no deal. If a seller has 40K IRS lien on the property, do you believe IRS will not actively collect on them? Paying off liens attached on the property is nothing but a huge benefit to the seller. Brent, why you do not count buyer pay seller's IRS tax lien a benefit?
2. I do not know who told you lienholders have no recourse. If a seller still alive and let property go to foreclosure, liens will fall off from the property, but it will stay with the seller. If the owner passed away, lien holders can file a claim when a probate opened.