January 24, 2017
A reader asks, “I am an inheritor of a reverse mortgage home. I have declared to the bank that I am paying off the loan in cash at 95% of the appraised value. The appraisal came in to my benefit.”
“The appraisal is less than two weeks old and the bank has already stated they may not be able to close before the expiration date because of their workload and may require another appraisal. There is over 100 days left before the expiration date.I told them this was unethical. Should I call HUD? Hire a lawyer?”
The only legal advice comments we can give out in cases like these is that it’s never a bad idea to consult legal counsel with specific experience in these issues. There are a number of things that can affect the outcome of situations like this including state law, federal regulations, and the specific legally binding terms of the reverse mortgage.
The reader question does not indicate whether or not the reverse mortgage is an FHA Home Equity Conversion Mortgage, or some other kind of reverse mortgage loan. Where FHA reverse mortgages, it’s never a bad idea to contact the FHA directly at their toll-free number (1-800 CALL FHA) to get advice or information.
FHA reverse mortgages are designed to become due in full when the borrower dies or no longer uses the home as the primary residence. In cases where the borrower dies, FHA reverse mortgages are designed to allow for the sale of the property with the proceeds of the sale going to the lender. The FHA official site has a page dedicated to basic information about FHA HECM/Reverse Mortgage loans, which includes the following:
“When the home is sold or no longer used as a primary residence, the cash, interest, and other HECM finance charges must be repaid. All proceeds beyond the amount owed belong to your spouse or estate. This means any remaining equity can be transferred to heirs. No debt is passed along to the estate or heirs.”
Non-FHA reverse mortgages may have different terms and conditions than FHA HECM loans/reverse mortgages. It’s important to read the legally binding agreement for the reverse mortgage to see what may be required in the event that the HECM loan becomes due and payable. The terms the borrower agreed upon with the lender will apply. Speak to the loan officer if you are uncertain about any of the terms of the reverse mortgage.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
Browse by Date: