Reverse Mortgage Loan Blog

DEAR BOB: My mother passed away a few months ago. She willed her home, which has a reverse mortgage, valued at $570,000, entirely to my 45-year-old brother. Yes, my sister and I are not too pleased! We know he needs to refinance in order to stay in the house, as he obviously does not qualify for a senior citizen reverse mortgage. How does the bank learn of the death of a reverse-mortgage borrower? Will our brother be offered a refinanced mortgage? He doesn’t work and has no income at this point so he would have to sell. –Barbara B.

DEAR BARBARA: Reverse-mortgage lenders periodically verify the senior citizen homeowner is still alive and living in the residence, which is the security for the reverse mortgage. After the borrower sells the home, permanently moves out or dies, the reverse mortgage “matures” and becomes due in full.

When there is a sale of the property, the reverse-mortgage lender will receive a loan payoff demand. If there is a title transfer, since most reverse mortgages provide for property tax payments by the reverse-mortgage lender, the lender knows there was a change of ownership. Or when there is a change of homeowner insurance policy name, that is another clue to the lender of a transfer affecting the reverse mortgage.

The reverse-mortgage lender will not offer refinancing to your brother, especially since he has no income qualifications.

Because he is unable to refinance with a new mortgage to pay off the existing reverse-mortgage balance, he will have to sell the house or lose it when the reverse-mortgage lender declares a default and forecloses. His best alternative is to sell the house and walk away with as much equity as possible.

Found here.

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