Once they're gone - You can find some direction from HUD and from the actual loan documents and agreements, but let me answer this as the pending executor for my own parents who happen to have a reverse mortgage. I’m not giving you any kind of legal advice, just saying what I’m planning to do.
My parents do have a Trust and a Will, so I know that we will have the proper authority to legally sell or refinance the home. Reverse mortgage servicers reach out to borrowers at a minimum of once per year to make sure they are still living in the property and they also rely on reporting agencies that monitor deaths. So - I will be calling the lender very soon after my parents are gone to let them know that they have “graduated”.
I will also be looking to see if there is equity in the property, meaning - is the balance on the reverse less than the value. That will be easy to do because every month the lender sends them a statement showing the current balance. I will use my contacts in the real estate world to help me to determine the value of the home.
If there is money there, then I will let the lender know that we are going to sell the house and they will be paid off at closing. If the house takes awhile to sell, I will take advantage of the allowable extensions to the foreclosure by writing the lender and requesting it.
If there is no equity, well, then I will let the lender know that too and ask them if they would prefer a “Deed in lieu of foreclosure” or would they just like to foreclose? They will want the deed, as it is less costly and time consuming, and so will I.
Here’s the rub - Many reverse mortgage borrowers will die without a will - then what? If that happens in your parents case, who has ownership of the property? I don’t know. I imagine you would need to talk to a probate attorney to find out who will have the power and authority to transer title, and how that is done. A judge’s order may be required. In anycase, without proper end of life and estate planning on your parents part - you may not have any authority to sign a listing agreement, a deed, or any other document on behalf of the estate. You will want to seek advice from a qualified, knowledgeable attorney.
FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. FHA provides this information free, and HECM housing counselors are available for free or at very low cost, to provide information, counseling, and a free referral to a list of FHA-approved lenders. Search online or call (800) 569-4287 toll-free, for the name and location of a HUD-approved housing counseling agency near you."
By Deborah Nance
Your Local Southern California Reverse Mortgage Professional
Click the Learn More Button below to email me a question.
iReverse Home Loans, LLC, NMLS#810502 originates reverse mortgages in Alabama, Alaska, Arizona (MB-0919584), California, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon (ML-5378), Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont (1164-MB), Virginia, Washington and Wisconsin.
Important Information: Reverse Mortgages are neither "endorsed" nor "approved" by the Federal Government. The FHA (Federal Housing Administration) provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM loans; the FHA does not make or originate loans. The owner(s) retain title to the property that is the subject of the reverse mortgage until the person sells or transfers the property and is therefore responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts or failure to maintain the condition of your property may cause the reverse mortgage loan to become due immediately. A reverse mortgage is a complex loan secured by your home. Whether such mortgage makes sense for you depends on your financial situation and needs. For these reasons, we strongly recommend that you consult with a qualified independent housing counselor, family members and other trusted advisers before making this decision. This website is not from HUD or FHA and was not approved by HUD or any government agency.