Paying off a Reverse Mortgage

In my business of arranging loans to trusts and estates, I pay off a significant number of reverse mortgages. As more seniors turn to reverse mortgages, surviving spouses or adult children become overwhelmed when one or both of their parents eventually dies.

When a reverse mortgage borrower dies, the loan becomes due and payable; and, if adequate and quick communication to the reverse mortgage company is not made, the property will go into foreclosure and additional fees added. Beneficiaries of trusts and estates, and intestate heirs, frequently call me when they want to keep the family home and prevent a trustee sale or foreclosure proceeding.

Here are a few practical tips:

  • Please call me as soon as the reverse mortgage borrower passes. The longer it takes to payoff the reverse mortgage lender, the more additional fees will be added.
  • A reverse mortgage servicer uses a number of resources to find out when a borrower dies, including the Social Security death index, proprietary databases and annual occupancy letters. Once the servicer discovers the borrower has died (or vacated the property for a nursing home), the servicer sends out a letter intended to inform the heirs of the rules of the loan and ascertain their intentions for the loan and the property.
  • Alternatively, if the reverse mortgage borrower was married, the surviving spouse might be able to remain in the home even if he or she wasn’t a co-borrower (please look at HUD’s New Guidelines for Non-Borrowing Spouses).
  • According to HUD guidelines: If the property is underwater the heirs may purchase the property directly from the lender at 95% of the appraised value. The borrower’s personal belongings and furnishings can be removed. Fixtures, as defined by state law, can’t.
  • If there are tenants in the property after the borrower passes away, it’s fraud (according to HUD guidelines) because the loan became payable when the last owner vacated the premises.

About The Author

Jonathan Brooks
Jonathan Brooks, President of First Probate Loans Jonathan maintains highly specialized expertise in California real property, finance/lending, and trust and estate laws. He has completed nearly 10,000 financial transactions to estates and trusts in more than 25 years of probate loan management work. Jonathan is a trusted source for attorneys throughout California, as well as for mediation and arbitration judges. A recognized industry expert, he serves as a single source for estate mortgage borrowing needs. California Bureau of Real Estate Broker # 01881423 Nationwide Mortgage Licensing System and Registry NMLS # 307111 Paralegal

No Comments

Leave a Reply

Encino Law Center
15915 Ventura Blvd.
Suite 203
Encino, CA 91436

How Can We Help? Contact Us Today

Send us an email via the form below, or call our office directly. We look forward to assisting you with your Probate and Trust Loan needs.

Contact Us