Reverse Mortgage Rules

Dear Phyllis,

I look forward to your real estate Q&A.

I am hoping you can offer some guidance. My 85-year-old mother fell and broke her hip and was rushed to the hospital. She has been in rehab for a month and just had a stroke. I don’t know if she can ever move back into her La Crescenta home. Therefore, I am concerned about the terms of her reverse mortgage. From my understanding, the house must be sold and the mortgage paid off within six months of her vacating. I have her power of attorney and don’t know what my next move should be. Thank you! Sharon

Dear Sharon,

Sharon, I understand this is a challenging time for you and your mother. It’s commendable that you’re taking proactive steps.

As per my understanding, your mother’s reverse mortgage will mature if she’s away from the property for more than six months for a nonmedical reason or more than 12 consecutive months in a medical facility. Violating this residency requirement could result in her being required to pay back the remaining loan balance. Therefore, it’s crucial to know these rules and plan accordingly. I believe you will have 12 months from the date of her hospitalization to pay off the mortgage. But please review your mother’s documents. I would not suggest contacting the lender at this point because, in my experience, they relentlessly enforce timely payoffs. I would not want to give them the heads-up of her not being in the home.

I advise seeking a local real estate agent with reverse mortgage experience. Have them meet you at her home and discuss, when the time comes, if you want to sell the home “as is” or if the Realtor suggests any potential repairs and improvements. This will help you get a timeline.

Although it’s likely that by the time you list and close escrow, it will be around two months – you can’t rely on that. Remember that although most homes in La Crescenta are selling quickly, some do not. There is even the possibility of selling and then the buyer canceling an escrow. You want to avoid the risk of the lender placing the home in default and paying additional fees or, worse, losing the home in foreclosure.

Best of luck to you and to your mother’s recovery.
Best regards, Phyllis