Reverse mortgage in pre-foreclosure

6 Replies

Deceased owners had a reverse mortgage,daughter is the the trustee and POA,we submitted a purchase offer to the bank,haven't heard anything from bank. I heard if reverse mortgage was backed by fha they will step in to pay the difference between offer and balance owed.The home has significant water damage hence the low offer of 20k, any help appreciated.

Sometimes that only applies to a property that actually completes the Trustee sale/Foreclosure process. If you are in pre-foreclosure, you are still dealing with the Servicer, not FHA.  So, this is probably being handled as a short sale.  Plan on 30-120 days to complete the sale.  If there are other moving parts like water damage, be sure the lender will take their time to evaluate.  Their goal is to find the highest net to Lender.  If they think they will get more for the property at Trustee sale/Foreclosure, they will let it go there, and not accept any offers ahead of time.

What is owed and what is the home worth? If it qualifies for a short sale then yes, they would take less than what is owed. Many reverse mortgages are serviced by NOVAD Consulting which is HUD's national servicer. They fall in this category when they are HECM reverse mortgages. They will take 95% of the appraised value as an offer.

Originally posted by @Cara Lonsdale :
Sometimes that only applies to a property that actually completes the Trustee sale/Foreclosure process. If you are in pre-foreclosure, you are still dealing with the Servicer, not FHA.  So, this is probably being handled as a short sale.  Plan on 30-120 days to complete the sale.  If there are other moving parts like water damage, be sure the lender will take their time to evaluate.  Their goal is to find the highest net to Lender.  If they think they will get more for the property at Trustee sale/Foreclosure, they will let it go there, and not accept any offers ahead of time.

That's not true. you are always dealing with FHA, in preforeclosure or not. They (FHA) approve the net, they approve the short sale, etc.

 

Originally posted by @Ron S. :
Originally posted by @Cara Lonsdale:
Sometimes that only applies to a property that actually completes the Trustee sale/Foreclosure process. If you are in pre-foreclosure, you are still dealing with the Servicer, not FHA.  So, this is probably being handled as a short sale.  Plan on 30-120 days to complete the sale.  If there are other moving parts like water damage, be sure the lender will take their time to evaluate.  Their goal is to find the highest net to Lender.  If they think they will get more for the property at Trustee sale/Foreclosure, they will let it go there, and not accept any offers ahead of time.

That's not true. you are always dealing with FHA, in preforeclosure or not. They (FHA) approve the net, they approve the short sale, etc.

Are you talking about FHA OWNED homes? Or FHA insured homes? Perhaps I can clarify what I was talking about....FHA insures loans. Lenders have the opportunity to offer loans with smaller than normal down payments because FHA insures them in case of default. When there is a default, the lender submits a claim to FHA for the loss.

You are correct in that FHA sets limits and processes. However, the funding lender is the one that approves or rejects the offer, per the FHA guidelines.

Here is a good article that explains the short sale process on an FHA insured loan.

FHA Insured Short Sale Process

 

RM’s have to sell for at least 95% of a current fha appraisal, whether short sales or as reo’s (for the first 4-6 months or so anyway for reo’s)