Ask Phyllis!

Reverse Mortgage Pitfalls

Dear Phyllis,

   Years ago my parents obtained a reverse mortgage; my father passed first. After our mother became ill, my brother moved back into the home and was her primary caretaker; mom passed a year ago.  As both parents are deceased, the bank is demanding the loan be paid off.  My brother will need to find a place to move but it will be difficult because he wants to keep the stray cats our mother took in. Two months ago the bank filed a notice of default – of course we don’t want to lose the home and our parent’s equity, but we don’t want to give it away in a fire sale.   I am the trustee but don’t know what my next move should be as there are just so many issues.    

Feeling Helpless

Dear Helpless,

   While no payments are due with a reverse mortgage, the mortgage is payable upon death.  Sadly, you need to face a harsh reality. Now that the Notice of Default has been filed (NOD) you have approximately 90 days before the sale date (foreclosure date).  If you do not pay the amount owed, a Notice of Sale can be recorded which states that the trustee will sell your home at (foreclosure) auction in 21 days.

You need to stay in close contact with your parent’s trust attorney (or another attorney).

You are in jeopardy of losing your parent’s home.  Unless your attorney advises otherwise, you should immediately get this home listed for sale with a seasoned real estate agent.  Their experience with distress sales may prove valuable in your obtaining an extension of the sale (auction) date.  Once hired, your Realtor® should begin the process of trying to postpone the sale date.

   I know that as the trustee you have some difficult decisions to make, but decisions need to be made and made very quickly.  If the home is foreclosed your brother and the stray cats will be evicted.  Unfortunately, unless you can pay off the mortgage the reality is that he and the cats are moving one way or the other.

  Phyllis Harb