Who Should I Contact If I Think Im Being Scammed
If you are contacted by anyone who is not your mortgage company offering to work on your behalf for a fee or claiming you qualify for a loan modification or some other solution, you can report the suspected fraud by calling:
| U.S. Department of Housing and Urban Development Office of the Inspector General Hotline |
Are Home Equity Conversion Mortgages The Only Reverse Mortgages Available
Home equity conversion mortgages are the most common reverse mortgages, but there are also proprietary reverse mortgages and single-purpose reverse mortgages.
The former allows a homeowner to take out a larger loan than an HECM. Proprietary reverse mortgages are for homes valued above the Federal Housing Administration limit of $970,800 the limit for proprietary reverse mortgages is $4 million. Unlike HECMs, proprietary or jumbo reverse mortgages are not insured by the federal government and carry few regulations.
Single-purpose reverse mortgages are typically issued by state and local governments or nonprofits, not private lenders. Rather than paying for everyday living expenses, single-purpose reverse mortgages are typically designed to pay for something specific, such as home repairs or property taxes. Fees for single-purpose reverse mortgages may be lower than for other reverse mortgages.
If You Were The Lender Can You Foreclose On A Reverse Mortgage Right Away In The Event Of Default
No, lenders cannot immediately seek foreclosure. They must first serve notice of the default and give the borrower an opportunity to correct the alleged issues.
So, can a home with a reverse mortgage be foreclosed? Yes, it can but for very few reasons. Whatever the reason for the reverse mortgage default, however, you should definitely seek professional advice if you believe that you have a valid reason to contest the alleged default.
We hope you have found this content helpful! If you have any questions, please dont hesitate to give us a call at 230-6679. Wed be happy to provide you with a free and no-obligation guidance.
About the Author, Jason
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Finding Out How Much You Can Borrow
Now that you know some of the essential details of a reverse mortgage, you can discover how much you can borrow. The amount depends on how much equity you have in your home, you and your spouses ages and your homes location and value.
Contact us at 1-866-522-2447 or use our reverse mortgage calculator to see how much you could borrow.
1 A home valued at $600,000 would rise in value to $712,612 over five years at a rate of 3.5%. This would be an increase of 112,612. When deducting the interest charges on a $300,000 mortgage over the same period, the homes equity would still grow by $14,498.
2 The guarantee excludes administrative expenses and interest that has accumulated after the due date.
How Will I Receive My Money
Reverse mortgage proceeds can be distributed in a variety of ways, such as immediate cash advance, line of credit, or monthly cash advance. Not every option will be available to every borrower, so it is important to make sure you understand your options by talking to your lender and an attorney or housing counselor.
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Reverse Mortgage Foreclosure Risks
Again, HECM reduces risk for borrowers. However, other kinds of reverse mortgages present more risks to borrowers or their next-of-kin. For example, responsibility heirs may take on the ownership of the home and mortgage upon the borrowers death, which can impose financial burdens if those family members are not prepared.
Additionally, in the case of a living borrower who experiences a reverse mortgage foreclosure, the lender may implement a deficiency judgment against you if the sale of your former property does not satisfy your debt.
The Borrower Does Not Uphold Their Obligations Of The Loan
When taking out a reverse mortgage, the borrower will still have certain obligations they must meet. These include paying the property taxes, maintaining adequate homeowners insurance, and making sure the property is kept in good condition. In the event that the borrower does not uphold these obligations, they will be in violation of the mortgage and the loan will become due and payable. Before foreclosing, however, the lender must typically provide the borrower with the opportunity to fix the deficiency. For example, if a borrower fell behind on their property taxes and the lender wanted to foreclose, they must provide the borrower with the opportunity to bring their property taxes up to date.
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What Is The Role Of My Reverse Mortgage Company/servicer
Your reverse mortgage company will ask you to certify on an annual basis that you are living in the property and maintaining the property. Additionally, your mortgage company may remind you of your property-related expensesthese are obligations like property taxes, insurance payments, and HOA fees. However, these expenses are your responsibility so be sure youve set aside enough money to pay for them and make sure to pay them on time.
What Are Reverse Mortgage Closing Costs
When you take out a reverse mortgage, there are several costs involved, many of which would apply for a conventional mortgage. They are fairly simple, though, and dont require a reverse mortgage costs calculator.
You will need to have an appraisal carried out beforehand, to provide an accurate evaluation of your home. This usually costs around $300-400.
Another reverse mortgage closing cost is the expense of hiring a lawyer. While HomeEquity Banks lawyers will carry out most of the legal work, you will still need to hire your own lawyer to provide you with independent legal advice. This can cost anywhere between $400 to $700, depending on your situation and who you hire. This is an important step, designed for your protection: HomeEquity Bank wants to ensure that you fully understand all the features of the CHIP Reverse Mortgage® before you decide to proceed.
HomeEquity Bank also charges its customers a flat fee for closing and administrative costs. This fee covers a number of obligatory legal processes, such as a title search, title insurance and other administrative costs. This reverse mortgage closing cost can range from $1,795 to $1,995. You can see the current reverse mortgage rates here.
In total, your reverse mortgage closing costs can be between $2,495 and $3,095. And if youre wondering how long a reverse mortgage takes to close, it will depend on your individual circumstances and if any additional paperwork is required.
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Foreclosure Protections For Reverse Mortgage Borrowers
HECM loans have traits that mitigate the financial damage for the borrower in the case of a reverse mortgage foreclosure. At the beginning of the reverse mortgage process, borrowers must attend a 90-minute counseling session. Approved by HUD, the counseling session educates the borrower on the loan details, what fees they must pay, and other available financial choices.
As noted in the foreclosure timeline above, two 3-month extensions are available for HECM borrowers or heirs struggling to avoid foreclosure. HUD provides final authorization for any extension request.
Additionally, when trying to avoid reverse mortgage foreclosure with a HECM loan, the borrower or responsible parties can return the deed to the home to the loan service provider, and the reverse mortgage foreclosure will not occur. Also, the borrowers credit score will not be damaged.
If you are the surviving spouse of someone who took out a reverse mortgage but did not incorporate you in the loan or the title to the home, you may qualify as a nonborrowing spouse. An eligible nonborrowing spouse can keep their home by meeting these five criteria:
Will Getting A Reverse Mortgage Affect My Social Security Payments
No. Social Security payments are not affected by a reverse mortgage. And the loan payments that you receive are not considered taxable income by the Internal Revenue Service . However, a reverse mortgage could impact any Supplemental Security Income that you may receive. SSI assistance is based on your current financial assets and monthly income, and its possible that the proceeds from a reverse mortgage would exceed the SSI limits.
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There Are No Deficiency Judgments With Reverse Mortgages
With a traditional mortgage, when a borrower does not meet the terms of the loan, the lender can foreclose. After the home is sold, the borrower may then still be liable for any difference between the sale price of the home and the amount still left on their mortgage. This is known as a deficiency judgment. It is important that borrowers who take out a reverse mortgage understand that these do not include deficiency judgments so, while the lender can foreclose on the home, they cannot hold borrowers liable for paying additional money than the amount of the loan.
What Is Shared Appreciation And Equity Participation
In exchange for a lower interest rate the lender and the borrower may agree to equity participation. Participation mortgages are so named because the lender participates, or has the right to a share in any increase in the value of your home.
A Shared Appreciation Mortgage takes into account the appreciation in value of the house between the time the loan is signed and the end of the loan term. The lender receives an agreed-to percentage of the appreciated value of the loan when the loan is terminated.
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What Happens To A Reverse Mortgage After Death
After the passing of the last surviving borrower, the reverse mortgage loan balance becomes due and payable. Many believe that the home reverts to the bank upon the death of the last borrower, but that is not the case.
Your heirs will have the option to decide whether they want to repay the loan balance and keep the home, sell the home and keep the equity or simply walk away and let the lender dispose of the property.
If they choose to keep the home, they will need to repay the loan and that means either refinancing the loan with new financing or with other money available to them. They can pay off the loan at the lower of the amount owed or 95% of the current market value.
If they wish to sell the home, they need to make sure that they take whatever steps are required to change the title so that they can sell the home and we encourage borrowers to contact an estate attorney to be sure they are taking the property steps for their circumstances.
The lender will work with heirs and if they are refinancing into a loan of their own they will typically give them up to 6 months to close that loan, or up to 12 months if they are selling the home.
Every 3-month extension may require evidence the home is listed for sale on the MLS. During this time, the lender or the lenders servicer will want to see the efforts of the family to sell and this is where the communication is important.
Can Your Reverse Mortgage Be Foreclosed On
We get calls on a regular basis from people who thought they were completely secure in their Reverse Mortgage but have now found out they are being foreclosed on. How is this possible if the company who owns the Reverse Mortgage has made this agreement with the homeowner so they can live out their days in the home? The simple answer is to look to your agreement.
Florida Statute 697.202 defines a Home Equity Conversion Mortgage as a reverse mortgage loan made to an elderly homeowner, which mortgage loan is secured by a lien on real property. It also defines an elderly homeowner as someone who is 70 years of age or older. If the home is jointly owned, then both homeowners are deemed to be elderly if at least one of the homeowners is 70 years of age or older.
Many Reverse Mortgages contain clauses that state you must live on the property and that you must keep up with repair of the property. If these clauses are not followed to the letter, then the mortgage company will foreclose on the property and you might be liable for certain expenses. Some of these could include, but are not limited to, default on paying Property Taxes or Homeowners Insurance, Death of the Borrower, or Failure to make timely Repairs of the Property. These are not the only reasons, but these are the most common that we see.
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Consult With Professionals Before Making A Decision
Taking out a reverse mortgage should not be an impulse decision. Instead, its important to speak with professionals who can provide more information to help you make the best decision for your financial future.
To qualify for an HECM, youll need to speak with a U.S. Department of Housing and Urban Development -approved counselor first. But dont stop there. If you have a financial planner or an estate planning attorney, speak with them as well to see how a reverse mortgage will affect not only your current finances but also any financial assets that you plan to leave your heirs. Talking with a consumer protection lawyer is also a good idea to make sure that you know the ins and outs of using a reverse mortgage to prevent foreclosure.
Reverse Mortgages Foreclosure Due To A Maturity Event
Often when traditional or forward loans end in foreclosure it is due to the borrowers failure to make the required monthly mortgage payment. This cant happen with a reverse mortgage, because it carries no monthly repayment obligation. Moreover, a reverse mortgage naturally allows the homeowner access to funds, which should reduce the likelihood that a borrower will default on their obligations.
However, though reverse mortgages dont require a monthly principal and interest mortgage payment during the life of the loan, there are other borrower obligations contained in the reverse mortgage loan agreement. The borrower has agreed to occupy and maintain the home as well as pay all property-related charges. Failure to do these things will cause the loan to mature.
A maturity event is a term used to describe the life stage of the loan when:
- The borrower or a beneficiary sells the property.
- The last surviving borrower leaves the home for 12 consecutive months due to illness.
- The borrower does not maintain the property.
- The borrower fails to pay property taxes.
- The borrower passes away.
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Types Of Reverse Mortgages
There are three types of reverse mortgages, and each of them is subject to reverse mortgage foreclosure conditions. Depending on where you live and your income level, you may be able to access one or more of these options. Note that with a reverse mortgage, your lender will most likely not require you to make monthly payments on the loan. Whether you make payments or not, interest will continue to accrue on the loan amount.
Rocket Mortgage® does not currently offer reverse mortgages but does offer the alternative cash-out refinance.
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Karon Warren has 20+ years of experience researching and writing about banking, mortgages, credit cards, savings, and other personal finance topics. Her work has appeared in Investopedia, USA Today, LendingTree, MoneyGeek, and Joy Wallet. She is a member of the American Society of Journalists & Authors, which awarded Karon the 2021 Exceptional Service Award.
Having a reverse mortgage can sound like a dream come true. Instead of making monthly payments to your mortgage lender, your mortgage lender sends you money, which you can use for whatever expenses you wish. To repay the mortgage, your heirs can simply sell the home after your death.
However, there are circumstances in which a lender may foreclose on a reverse mortgage. Its important to know what these circumstances are so that you can avoid them.
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Reverse Mortgages Are Non
Upon the sale of the property, all remaining equity belongs to the heirs, just as with a forward mortgage.
As we stated previously, a reverse mortgage is a non-recourse loan. Which means that, if with the combination of the accrued interest and current market conditions the property will not sell for enough to repay all amounts owed on the loan, then the borrowers heirs are not liable for any additional amounts owed.
Borrowers pay for mortgage insurance to the Federal Housing Administration , a division of The Department of Housing and Urban Development which guarantees that the borrower will always have access to the reverse mortgage proceeds and that the borrowers heirs will never owe more than the property is worth on a bona fide sale to a third party or a Deed back to the Lender.
The program does require a bona fide sale to a non-related third party, heirs cannot sell the home to other family members for less than is owed on the reverse mortgage expecting the FHA insurance to cover any shortfall to the lender on the amount owed.
There are no restrictions on sales to family members or otherwise, just in the case of a balance of the reverse mortgage being higher than the value of the property and heirs wanting the lender to forgive the over value portion of the loan and keep the property within the family.
