Reverse mortgages are a great way for seniors to use the equity in their primary residence to receive monthly payments to help pay for living expenses. Reverse mortgages are generally associated with the FHA's Home Equity Conversion Mortgage (HECM). Mortgage companies must comply not only with state procedural and substantive laws, but must also comply with FHA and HUD rules and regulations since reverse mortgages are insured through FHA and/or the Department of Housing and Urban Development (HUD). When the mortgagor/owner dies, the mortgage company is entitled to demand that the entire outstanding balance be satisfied. The first thing it will do is determine if an estate proceeding has been commenced and if so, it will serve the representative of the estate with a default notice. If no estate proceeding has been commenced, then the mortgage company will likely seek to file a petition for administration and the court will appoint an administrator (usually a public administrator). Once the administrator or estate representative is served with the default notice, the estate will have the right to demand that the mortgage company undertake to have an appraisal done (must be a HUD certified appraiser). If the appraisal shows that the value of the property is greater than the amount owed on the mortgage then the estate is entitled to pay the amount owed in return for a satisfaction of the mortgage. In the alternative, If the appraisal shows that the value of the property is less than the amount owed on the mortgage then the estate is entitled to pay the 95% of the current appraised value in return for a satisfaction of the mortgage. This could be a Godsend if the amount owed is significantly higher than the appraised value of the mortgaged property.
Generally, if the default is not cured within 30 days, then the mortgage company can move to commence foreclosure proceedings. However, if the decedent was married and living with a spouse at the house, then the spouse may be entitled to stay in the house, but in order for this to occur, certain conditions must be met. There are many other nuances that are too long to discuss. Always speak with an experienced foreclosure lawyer who is also familiar with the HUD regulations and contract provisions pertaining to reverse mortgages.
Generally, if the default is not cured within 30 days, then the mortgage company can move to commence foreclosure proceedings. However, if the decedent was married and living with a spouse at the house, then the spouse may be entitled to stay in the house, but in order for this to occur, certain conditions must be met. There are many other nuances that are too long to discuss. Always speak with an experienced foreclosure lawyer who is also familiar with the HUD regulations and contract provisions pertaining to reverse mortgages.
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