Ask Phyllis!

Reverse Mortgage Basics

Dear Phyllis,

I am an avid reader of your column. I am the executor of my parent’s estate. Several years ago, they obtained a reverse mortgage. My father passed last year, and my mother is in poor health. On the internet I have read horror stories about heirs losing their home to foreclosure. I am hoping you will shed some light on reverse mortgages?  Cleo

Dear Cleo,

It is impressive that you are so proactive! Reverse mortgages are complicated. Within 30 days of your mother’s passing you will be required to notify “your intent” to the reverse mortgage lender. “Intent” is to pay off the mortgage or sell the home. When you notify that your intent is to sell, provide a copy of the trust and death certificate. In some instances, you will also need to provide a copy of a listing agreement – all within this initial 30-day period.

At this time, a 90-day extension from the date of passing is typically granted.

The lender usually sells the mortgage and a servicing company collects payments, etc. The loan servicer has a variety of methods to learn if the heirs don’t comply with the notification process. The servicing company typically subscribes to a number of different services which cross reference death records. In addition, they request an annual occupancy certificate.

The 90-day extension (from the date of passing) is an extremely tight timeline.  It is necessary to quickly list the home with a Realtor® who understands the complexities of reverse mortgages.  The home needs to be quickly and efficiently prepared for sale. A Realtor® experienced with the basics of reverse mortgages will order a preliminary title report and ensure that there are no additional liens that the heirs may not have been aware of.

In addition, your real estate agent should be checking title several times a month to ensure that a Notice of Default (N.O.D.) has not been filed which initiates the foreclosure process. Once an N.O.D. is filed, the home must be sold in approximately ninety days to avoid foreclosure. While the reverse mortgage timeline is ticking, your Realtor® needs to be working with escrow and ordering payoff figures.

This is a complicated situation and should be dealt with only by experienced real estate professionals who are well versed on reverse mortgages. I wish your mother better health.