Folklore and the Reverse Mortgage
I had the pleasure of speaking to a real estate agent yesterday. She wanted to discuss the reverse mortgage, in particular how it can be used as purchase money after January 1.
The realtor lady showed interest in the purchase program, but before getting needed answers, she decided to go into a long drawn-out story about a person wronged by a reverse mortgage company.
In efforts to stop the rampant spread of misinformation, falsehoods, mythology and every other "ology" you must read this entire article. You can't read the next four or five paragraphs, stop, and tell everyone you know the painful effects of the reverse mortgage.
Like most stories that may not be true the story is told second, third or fourth hand. In this case, the agent had a girlfriend, who's friend's father had a reverse mortgage on his home. After his passing the home made it's way into the hands of the FOAFOAR (I'm going to use this acronym for the Friend Of A Friend Of A Real estate professional).
As it turned out the home had negative equity. The loan balance exceeded the value of the home. It's a rare thing, but can happen in reverse mortgage world. At death the mortgage company required repayment of the entire loan.
After selling the property, the FOAFOAR still had to come up with an additional $40,000 to repay the bank the difference.
Is this story possible. I suppose so, but it is highly unlikely. FHA makes up the rules for lenders in the reverse mortgage business. One of the rules states that a lender cannot force the borrower or family to make up the difference if there is a deficiency. Thus the term "non-recourse" is associated with reverse mortgages.
In the circumstance of a deficiency or negative equity the borrower or estate conduct the sale of the property as follows....
The mortgage company will require a real estate agent to list and market the property for sale. In the process the realtor will furnish comparable properties so the mortgage company knows the property will be sold at a fair market value. Eventually the home is sold and the lender is repaid the sale price less closing costs.
HUD makes the rules and the lender is entitled only to these proceeds from the sale of the home. If the loan balance exceeds the net proceeds, it's tough cookies for the lender. They have to write it off and go on their merry way.
Enough myths exist about the reverse mortgage to fill a book. I thought this example a good one because it does come up a lot. If deciding whether a reverse mortgage is right for you, make sure you get professional advice, rather than chatting with the guy at the coffee shop who "knows someone who knows someone".
The realtor lady showed interest in the purchase program, but before getting needed answers, she decided to go into a long drawn-out story about a person wronged by a reverse mortgage company.
In efforts to stop the rampant spread of misinformation, falsehoods, mythology and every other "ology" you must read this entire article. You can't read the next four or five paragraphs, stop, and tell everyone you know the painful effects of the reverse mortgage.
Like most stories that may not be true the story is told second, third or fourth hand. In this case, the agent had a girlfriend, who's friend's father had a reverse mortgage on his home. After his passing the home made it's way into the hands of the FOAFOAR (I'm going to use this acronym for the Friend Of A Friend Of A Real estate professional).
As it turned out the home had negative equity. The loan balance exceeded the value of the home. It's a rare thing, but can happen in reverse mortgage world. At death the mortgage company required repayment of the entire loan.
After selling the property, the FOAFOAR still had to come up with an additional $40,000 to repay the bank the difference.
Is this story possible. I suppose so, but it is highly unlikely. FHA makes up the rules for lenders in the reverse mortgage business. One of the rules states that a lender cannot force the borrower or family to make up the difference if there is a deficiency. Thus the term "non-recourse" is associated with reverse mortgages.
In the circumstance of a deficiency or negative equity the borrower or estate conduct the sale of the property as follows....
The mortgage company will require a real estate agent to list and market the property for sale. In the process the realtor will furnish comparable properties so the mortgage company knows the property will be sold at a fair market value. Eventually the home is sold and the lender is repaid the sale price less closing costs.
HUD makes the rules and the lender is entitled only to these proceeds from the sale of the home. If the loan balance exceeds the net proceeds, it's tough cookies for the lender. They have to write it off and go on their merry way.
Enough myths exist about the reverse mortgage to fill a book. I thought this example a good one because it does come up a lot. If deciding whether a reverse mortgage is right for you, make sure you get professional advice, rather than chatting with the guy at the coffee shop who "knows someone who knows someone".
About the Author:
Learn about other folklore plus five monster blunders at the Reverse Mortgage Texas Guide. For great questions for your lender try 5 hard hitting questions for the mortgage company before getting your Reverse Mortgage in Texas.
posted by Credit Counseling at
5:05 AM
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