Reverse Mortgage Foreclosure

7 Replies

Can anyone explain how these work? What I don't understand is if the homeowner is about to foreclosure - why don't they sell their home, pay off the remaining balance, and pull out their equity? Could I be missing something?

@Dan Roma , my understanding is that the owner would have "run out of equity" according to the reverse morgage contract they have with their Lender/Borrower - the Bank!

So, the home is being sold, whether the "owner" wants to sell or not. That's not to say that full market value shouldn't be sought, or that if there is any remaining home-owner equity, that they wouldn't receive that balance. Clear as mud?...

@Dan Roma I have actually worked in the RM field in the past. The way that it works is they are daily interest loans, generally have no payment requirements during the life of the loan, however the equity of the property gets ate up every day. the bank is probably not going to ask them to leave the property when equity position is upside down. short sale is usually an option via arms length transaction, or payments can generally be made for loan paydown and eventual refi once get loan to a more favorable LTV. feel free to PM if you have questions!
Originally posted by @Dan Roma :

Can anyone explain how these work? What I don't understand is if the homeowner is about to foreclosure - why don't they sell their home, pay off the remaining balance, and pull out their equity? Could I be missing something?

Same as any other foreclosure. 

What happened? Borrower died? Borrower failing to pay taxes and insurance? Borrower no longer residing in home as primary? 

If there is equity the property can be sold and the bank gets its payoff. 

Don't know yet but most likely homeowner fell behind on taxes and insurance. So, what type of offer can I come in at? Does it have to be 95% of ARV?

If it is going to be short sale, it must sell for 95% of a current fha appraisal.

@Dan Roma .... Yes, that's true. they could do that. But unfortunately not all home owners have the knowledge to do that. I'm meeting with a lady who is  a homeowner to educate her on some of her options. well, that's where we come in and make money, Right? Lol

Thanks

Fele

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