Reverse mortgage: deed in lieu of foreclosure

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jefmafnl
Posts: 598
Joined: Sun Mar 25, 2007 7:11 am

Reverse mortgage: deed in lieu of foreclosure

Post by jefmafnl »

My mother-in-law (90) may be doing this soon (giving the bank title to the house as payment of the reverse mortgage). The HUD rules don't quite match what the bank is demanding. Does anyone have experience with this? Thanks.

J
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Meaty
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Re: Reverse mortgage: deed in lieu of foreclosure

Post by Meaty »

Way more info is needed. Typically, a reverse mort lender can't foreclose until the borrower is deceased or other non-contractual delinquency occurs like failing to pay property taxes. Please explain how she has arrived in her current situation
"Discipline equals Freedom" - Jocko Willink
sscritic
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Re: Reverse mortgage: deed in lieu of foreclosure

Post by sscritic »

If the FIL was the borrower, the MIL wasn't on the note, and the FIL is now deceased, the note may be due. HUD thinks so, even if AARP doesn't. (There might be some state laws, but I can't find them right now.)

The law is somewhat unsettled (court cases and all that). Is this recent enough?
AARP sued the Department of Housing and Urban Development (HUD) on behalf of three surviving spouses who faced imminent foreclosure and eviction from their homes. The case involved the spouses of individuals who took out Home Equity Conversion Mortgage (HECM), which are the most widely available reverse mortgage and are administered by HUD. AARP charged that in not protecting spouses from foreclosure, HUD was violating federal law.

In a decision issued September 30, 2013, the U.S. District Court for the District of Columbia agreed with AARP and told HUD to find a way to shield surviving spouses from forclosure and eviction.

“The decision marks a turning point for surviving spouses such as our clients and ensures that they will receive the protections guaranteed by the law: that they will be able to remain in their homes, despite the loss of their husband or wife,” said Jean Constantine-Davis, a senior attorney with AARP Foundation Litigation.

It’s not clear yet how HUD will correct the problem. One possibility is that the agency may take over affected loans from the banks that hold them. But experts stress that the ruling does not mean that couples can safely take out a reverse mortgage and leave one spouse off the loan.
I read the last bolded part as the bank can still foreclose; it is up to HUD to step in and take over the mortgage.
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Meaty
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Re: Reverse mortgage: deed in lieu of foreclosure

Post by Meaty »

sscritic wrote:If the FIL was the borrower, the MIL wasn't on the note, and the FIL is now deceased, the note may be due. HUD thinks so, even if AARP doesn't. (There might be some state laws, but I can't find them right now.)

The law is somewhat unsettled (court cases and all that). Is this recent enough?
AARP sued the Department of Housing and Urban Development (HUD) on behalf of three surviving spouses who faced imminent foreclosure and eviction from their homes. The case involved the spouses of individuals who took out Home Equity Conversion Mortgage (HECM), which are the most widely available reverse mortgage and are administered by HUD. AARP charged that in not protecting spouses from foreclosure, HUD was violating federal law.

In a decision issued September 30, 2013, the U.S. District Court for the District of Columbia agreed with AARP and told HUD to find a way to shield surviving spouses from forclosure and eviction.

“The decision marks a turning point for surviving spouses such as our clients and ensures that they will receive the protections guaranteed by the law: that they will be able to remain in their homes, despite the loss of their husband or wife,” said Jean Constantine-Davis, a senior attorney with AARP Foundation Litigation.

It’s not clear yet how HUD will correct the problem. One possibility is that the agency may take over affected loans from the banks that hold them. But experts stress that the ruling does not mean that couples can safely take out a reverse mortgage and leave one spouse off the loan.
I read the last bolded part as the bank can still foreclose; it is up to HUD to step in and take over the mortgage.
This is spot on and why many are using reverse mortgages in a risky fashion. Both husband and wife need to be on the note.
"Discipline equals Freedom" - Jocko Willink
Topic Author
jefmafnl
Posts: 598
Joined: Sun Mar 25, 2007 7:11 am

Re: Reverse mortgage: deed in lieu of foreclosure

Post by jefmafnl »

Mother-in-law (90) moving to assisted living, house will be empty. Amount owed is probably equal to or greater than value of house (hard to tell, slow market in that area).

I called the bank anonymously, to ask about deeding good marketable title to the bank (as in the HUD regulations below). They explained their "deed in lieu of foreclosure" process,
which they say takes about 90 days, and which they say requires "investor approval" (bank only services the mortgage, doesn't hold it).

I quoted them some of the HUD language below, but they insist on "investor approval," saying it's usually not a problem since investors want to avoid foreclosure.

I would prefer for the process not to require investor approval, and I would prefer to settle this without hiring a lawyer. All three adult children (including my wife) live thousands of miles away from my mother-in-law.

Has anyone been through this process?

Thanks.

J


From the HUD manual:

From HUD 4330.1, Chapter 13

B.The Mortgage Is Due And Payable With HUD Approval When:
1.The property is no longer the principal residence of at
least one mortgagor for reasons other than death.
2.No mortgagor maintains the property as a principal
residence for a period exceeding 12 months because of
physical or mental illness.

13-33DISPOSITION OF DUE AND PAYABLE MORTGAGES. For a due and payable
mortgage, the mortgagee must:
A.Issue A Repayment Notice. The mortgagor or the mortgagor's
estate must be issued a repayment notice stating that the
mortgage is due and payable. The notice must also provide
the amount of the outstanding balance and the following
instructions:
1.That the debt must be paid in full; or the property
must be sold for the lesser of the debt, including
shared appreciation, if any, or 95% of the appraised
value; or good marketable title to the property must be
deeded to the mortgagee.
2.That the mortgagor or the mortgagor's estate may
request an appraisal, at his or her own expense, if an
estimate of the property's current value is desired.
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