Fire, insurance and reverse mortgages

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Joined: Thu Oct 18, 2018 6:47 pm

Fire, insurance and reverse mortgages

Post by yborcity » Thu Oct 18, 2018 6:48 pm

Hi bogleheads —

Question about fire, insurance and reverse mortgage… My next door neighbors home burned down recently — no one inside — no major injuries. The homeowner is in long-term care and his kids check by on the house from time to time.

My home (we live in the city, single family home with close proximity to neighbors) was spared the worst of it: some smoke and water damage and a bunch of repair work needed for fence/landscaping. The neighbor’s house is a total teardown.

Here’s the thing we’re trying to understand:

The fire inspector said that they’ve decided to stop the investigation because of the financial situation of the homeowners — that they would need significantly more resources in order to complete the investigation and were unlikely to get them.

I spoke with the homeowner’s son who said they are in a reverse mortgage - they were trying to climb back out of it, but that as a result of the fire, the bank was likely to take possession and raze the property. He also said that they do have insurance on the property, a requirement in their reverse mortgage.

So my question is… how do the reverse mortgage, insurance and the fire inspection/investigation interact? The fire department needs to be paid by the insurance company to investigate?

My priorities are mostly getting the property cleaned up (demolished responsibly, as it still poses a safety and health risk) and making sure that our insurance makes us whole. If anyone has any advice along any of these lines, would be very appreciative.

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