What Could Possibly Go Wrong?

WATCH OUT FOR DELINQUENT PAYMENTS OTHER THAN JUST THE REVERSE MORTGAGE PAYOFF.

If you've recently inherited property encumbered by the balance of a reverse mortgage from a loved one who has passed away, you may find that you'll have to pay more than just the balance of the reverse mortgage in an attempt to keep the property.

A common scenario goes like this:
When a person age 62 or older has equity in their home they can take out a reverse mortgage equivalent to up to roughly 55% of the value of their home.

In our scenario let's say Sally owns a home that was valued at $200,000 ten years ago. At that time, when she was just 68 years old, she took out a reverse mortgage for 40% of the value of her home, which equaled $80,000. She elected to take the $80,000 in monthly increments over the course of 8 years.

That's what Sally did ten years ago.

Today, Sally is 78 years old and plagued by health problems. Two years ago her reverse mortgage payments stopped and now she barely has money to pay for necessities like food, housing, and medical insurance. Since Sally is struggling just to provide for her basic needs she had to stop paying property taxes.

If Sally is unable to find additional income to catch up on her delinquent property tax payments, the outstanding balance could become a problem for her children when they inherit her home after Sally passes away.

THE HIDDEN DANGER OF UNPAID PROPERTY TAXES

What many people are unaware of is what can happen when property taxes go unpaid.

Even though we're told that we own a house once we pay off the mortgage, the reality is that we do not truly own the house. Well, technically we do since we could put the house onto the flatbed of a tractor-trailer and move it wherever we want to, but the reality is that as long as that house stays on land which is part of a state, county, city, municipality then the house remains collateral for unpaid property taxes. If property taxes go unpaid, the city/county can swoop right in and demand that the balance of unpaid property taxes be paid immediately or else they can force foreclosure proceedings on the home in an effort to recover the unpaid property taxes.

In the scenario laid out above, this would mean that Sally's heirs would not only have to pay off the balance of the reverse mortgage in order to keep the home, they would also have to pay off the delinquent property taxes or risk foreclosure on their Mother's home, and perhaps the home they grew up in.

DO YOUR HOMEWORK

So, if you've recently inherited a home encumbered by an unpaid reverse mortgage balance, check to see if the property taxes are paid to date. In order to do this contact the county tax assessor where the house is located, or contact us and we can help.

If there are delinquent property tax payments you'll need to factor that unpaid balance in with the unpaid balance of the reverse mortgage to get a complete understanding of your financial obligations for keeping the home you've inherited.

Our Mission

There are approximately 775,000 unpaid reverse mortgages in the world today, with the rate of default at a record high, according to a recent story in the New York Times. After the recent housing crash, which demolished equity in houses, and because reverse mortgages are marketed as loans the borrower "doesn't have to pay back",  a large percentage of these unpaid reverse mortgages will be inherited by surviving family members.

What this could do is leave family members who have inherited their parent's property on the hook for paying off any reverse mortgage balance not paid by the home's equity upon sale of the property. Although HUD and FHA, which insures 90% of existing reverse mortgages, have safety nets in place which might prevent this from happening there's still great risk that you aren't protected by such measures.

This blog is dedicated to helping folks understand the risks and rewards of reverse mortgages but, more importantly, to help those who have inherited property encumbered by a reverse mortgage. If you're reeling from the shock of discovering that you must pay off an inherited reverse mortgage or suffer losing your parent's home to foreclosure, we're here to help.