Reverse Mortgage

[gamma]

My SIL is in a long term care facility. She took out a reverse mortgage, without consulting any family members, on the home she was living in 10 years ago. The value of the home is equal to the balance owed on the reverse mortgage. Therefore there is no equity left in the home. The reverse mortgage allowed her to remain in her home for an additional 10 years, but she is physically unable to return. She has no additional funds to continue to support the home or pay the house insurance, so the house is vacant. Would anyone know the procedure of turning the house back over to the mortgage company? It's one of the companies which advertise continuously on television.

[Kestrel]

Realtor family here. I would for sure call an agent and get a free CMA (marketing report of what the home might sell for). The reality might be better than you think.

You can sell the home and pay off the reverse mortgage, if there's room to do so. The difference between the reverse mortgage and the selling price (less the fees of selling; agent, title, ect.) would be yours if you sell, but would belong to the mortgage holder if you just turn over keys/possession.

If not, you'll have to contact the mortgage holder directly. They will most likely only speak with the legal owner, unless you have real estate power of attorney.

Keep in mind that this really badly effects the credit score of the owner, if the owner gets out of the facility at some point.

[gamma]

Thank you so much for your response. I don't anticipate her going home ever. I have spent the past 6 months helping her apply for Medicaid to pay for the nursing home and I hope that she has an August 1st pick up date for when the Medicaid is approved and will pay for the home. Any profit realized from the sale of the house would end up going to the facility and at this point, I just want to turn the house back to the mortgage company. I just don't know how to proceed. A notarized letter sent certified mail notifying the mortgage company that the house is now theirs, please come to the nursing home to get the key? At this point, I just want my life back.

[abh5e8]

Can you sil call the mortgage company and ask? Or does some one have power of attorney, that could call?

[Kestrel]

If you've determined that's what you want to do, SIL or whomever has real estate power of attorney has to contact the mortgage holder and find out how to move forward. Every company is different.
If you go power of attorney route, be aware that it has to be real estate power of attorney, not a basic one in every state that I'm aware of.
If SIL is doing this herself, make sure the mortgage company is aware she is in a care facility and will need a mobile notary to come to her to do paperwork. This is a nominal charge; for us less than $200, and a great help to have someone come to YOU and tell you where to sign and get the papers to the right people.
Remember as well, the mortgage holder has no obligation to take keys instead of being paid off. They may simply say no. In that case, fees continue until they decide to foreclose, which could be years depending on your market. Until and unless the mortgage holder takes possession, the owner is STILL responsible for homeowner's taxes and upkeep on the home/yard, and there is most likely a clause in the mortgage that homeowner's insurance must be kept, as well. This is a worst case situation, but it does happen. If this does happen, the only solution I'm aware of is to try a "short sale", where you agree with the mortgage holder to sell the home for what you can get for it, and try to get the mortgage holder to take less than they are owed. You will need an experienced agent to do this, and again, the mortgage holder may say no to this as well. Short sale is a long, drawn-out pain in the ----- process that can take a year or more, and fails more often than succeeds.

If the mortgage holder does not accept keys, you really need an agent to help you that is experienced in both short sale and reverse mortgage.

[gamma]

Thank you so much for this information. I wanted to be as informed as possible before contacting the mortgage company. She has absolutely no funds and I am only in a position to help her with calls, but not financially. There will be no heat to the house or insurance. The pipes could freeze. Wouldn't it be in the banks best interest to take the keys and protect their investment? Even if they file a lawsuit against her she is physically unable to show up in court and her mental capacity is declining. Doesn't a company conducting reverse mortgages whose client base consists of elderly people who will become infirm, expect such outcomes? She entered into this reverse mortgage agreement without informing any family members.

[Kestrel]

If the house is old, in a crappy neighborhood (think Detroit after the auto crash), in poor repair, or otherwise a problem, the mortgage holder may not want it; especially if back taxes are owed. In general, tax liens must be paid off first. So, if the taxes continue to accrue and not get paid, eventually it will be repo'd for back taxes and the mortgage holder will write off the loss. If the mortgage holder takes possession, they are responsible for taxes and upkeep.
Keep in mind I'm talking very general, but let me throw out some numbers to make it easier to understand. Let's say the house is worth $100K for its age and in good repair. However, there is $15K is back taxes, and repair issues in the house that will take $25 to fix (roof leak, mold issue, fire damage, water leak, whatever; or simply so old/worn that it needs extensive remodeling). Repos in general sell for less than owner-sales, just because. The mortgage holder will not put any money into the house to fix it, at all. So a house that might sell for the $100K will sell for more like $60, to someone with a cash deal willing to take on the project. The selling owner would then have to pay off the back taxes and utilities in order to complete the sale. After doing all this, and paying the agent, upkeep, title, closing costs, ect, as well as the cost of the mortgage holder's staff and their costs - would there be enough of the $60K sale price left to cover the debt paid to SIL? Sometimes, the mortgage holder decides it's better off to just write off the loss, do nothing, and left the taxman eventually take it.

BUT - remember I'm talking worst case here! Call the mortgage holder, if the debt is as close to the value as you think, they will most likely take the keys. But the longer you wait, the more the debt grows, and the less likely that is. It will take time to go through the process, and if there is no heat in the home, you want this DONE before the weather gets cold.

[DualvansMommy]

If the house is old, in a crappy neighborhood (think Detroit after the auto crash), in poor repair, or otherwise a problem, the mortgage holder may not want it; especially if back taxes are owed. In general, tax liens must be paid off first. So, if the taxes continue to accrue and not get paid, eventually it will be repo'd for back taxes and the mortgage holder will write off the loss. If the mortgage holder takes possession, they are responsible for taxes and upkeep.
Keep in mind I'm talking very general, but let me throw out some numbers to make it easier to understand. Let's say the house is worth $100K for its age and in good repair. However, there is $15K is back taxes, and repair issues in the house that will take $25 to fix (roof leak, mold issue, fire damage, water leak, whatever; or simply so old/worn that it needs extensive remodeling). Repos in general sell for less than owner-sales, just because. The mortgage holder will not put any money into the house to fix it, at all. So a house that might sell for the $100K will sell for more like $60, to someone with a cash deal willing to take on the project. The selling owner would then have to pay off the back taxes and utilities in order to complete the sale. After doing all this, and paying the agent, upkeep, title, closing costs, ect, as well as the cost of the mortgage holder's staff and their costs - would there be enough of the $60K sale price left to cover the debt paid to SIL? Sometimes, the mortgage holder decides it's better off to just write off the loss, do nothing, and left the taxman eventually take it.

BUT - remember I'm talking worst case here! Call the mortgage holder, if the debt is as close to the value as you think, they will most likely take the keys. But the longer you wait, the more the debt grows, and the less likely that is. It will take time to go through the process, and if there is no heat in the home, you want this DONE before the weather gets cold.

Yes, all of this is very good advice! Also, do you have POA to handle phone calls and notary paperwork?

There's this house around the corner that happened in pp above example. It was an elderly retired couple, wife went into nursing home with dementia and husband died suddenly this past Fall. Came to find out their only son lived in NZ, didn't want to deal with it for some reason. So house sat empty all those months through the worst winter without heat or lightning. Mortgage company didn't want it because house took on so so much damage from frozen pipes and collapsed roof. This is a house that could have been valued 550K, so taxman took it back and now there's action going on in that house.

The less debt the easier it is for the house to go through a short sale.


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The taxes and house insurance are paid up until August 1st, now a new quarter is owed. There is still gas and electric, but the bill is probably over due, and a full tank of oil which won't last through a whole winter. I spoke to my son about winterizing the house before the first frost if the bank doesn't take over. The home is in a very nice, manicured lawns, well taken care of neighborhood; however, it is the only home in disrepair, due to a lack of cash for maintenance. I'm sure my SIL is embarassed to be doing this to her neighbors. I do not want to assume POA, she can still make decisions for herself and I don't want any financial responsibility. I so appreciate all of your input so I am prepared to call Champion Mortgage! The TV commercials with the slogan, "Champion says Yes!". Let's see what they say now!