Get Help to Avoid Foreclosure
Stop foreclosure and save your credit.
Otherwise known as a reverse mortgage, a HECM is a type of loan available to homeowners who are 62 years old or older and have significant equity in their home. With a reverse mortgage, the lender pays the homeowner a portion of their home equity in a lump sum, a line of credit, or a series of monthly payments. The loan is called a “reverse mortgage” because the lender pays the homeowner, rather than the homeowner paying the lender.
The loan must be repaid when the homeowner dies, sells the home, or permanently moves out. If the loan amount exceeds the value of the home when it is repaid, the lender absorbs the difference. However, if the home value exceeds the loan amount, the remaining equity belongs to the homeowner or their heirs.
Paying off your mortgage can be complicated, depending on how much equity you have in your house. Reverse mortgage foreclosures come with a few unique considerations, one of which is how your heirs will deal with the property (see “Heirs inheriting a home through reverse mortgage” for more information).
Reverse mortgages can be helpful for seniors who need additional income and want to stay in their homes. However, they also come with risks and fees, and it is important to understand the terms and consequences of a reverse mortgage before taking out the loan. A reverse mortgage is a complex loan, and many borrowers do not completely understand all the terms and requirements. Not having a proper understanding can lead to unfavorable circumstances like foreclosure.
Reverse Mortgages in Default
Options to Stop a Foreclosure on a Reverse Mortgage
If you are unable to come up with the money needed to bring taxes or insurance up to date or perform needed repairs, there are other options to stop a foreclosure on a reverse mortgage. It’s important to note that these options may depend on the specific terms of your reverse mortgage agreement and the lender’s policies. Consulting with a reverse mortgage counselor and seeking legal and financial advice can help determine the best course of action for your situation.
- Get a new mortgage—If you qualify, you can obtain a new mortgage to pay off the balance on the reverse mortgage. However, this means you will be responsible for making monthly payments on the new loan.
- Use your existing line of credit – If you owe past property taxes or mortgage insurance payments, you can contact your loan servicer to use your existing line of credit to pay off the outstanding amount. Keep in mind that using the line of credit will incur additional interest fees.
- Sell the home – Selling the property can help pay off the reverse mortgage. The loan servicer typically accepts the lesser of the amount owed on the reverse mortgage or 95% of the current market value of the home. If the sale proceeds exceed the amount owed, you can keep the excess funds.
- Sign a deed in lieu of foreclosure – This option involves voluntarily signing over the property’s deed to the loan servicer, which cancels the debt and returns the property. Specific requirements must be met, such as leaving the home in good condition, removing personal belongings, and ensuring a clean title.
Under certain circumstances, a reverse mortgage may become due and payable, and the lender may initiate foreclosure proceedings. These circumstances include:
- Failure to pay property taxes:
- Borrowers are responsible for paying property taxes, and if they fail to do so, the lender may initiate foreclosure.
- Failure to maintain homeowner’s insurance:
- Borrowers are required to maintain homeowner’s insurance, and if they fail to do so, the lender may initiate foreclosure.
- Failure to maintain the property:
- Borrowers must keep the property in good condition, and if they fail to do so, the lender may initiate foreclosure.
- The borrower no longer occupies the home as a principal resident:
- Reverse mortgages require the borrower to live in the home as their primary residence. If the borrower no longer lives in the home, the lender may initiate foreclosure. However, if the borrower is away from the home due to mental or physical illness and no other borrower occupies the property, the mortgage may become due and payable after 12 consecutive months.
- Death of the borrower:
- Upon the death of the borrower, the loan becomes due and payable. If the borrower’s heirs are unable to repay the full balance, the lender may initiate foreclosure.
- The property is sold, or its title is transferred:
- If the home is sold or its title is transferred, the reverse mortgage becomes due and payable. The proceeds from the sale are used to repay the loan, or if the title is transferred, the loan becomes due and payable.
Common Questions
Why is my reverse mortgage in foreclosure?
Foreclosure can occur with a reverse mortgage if you fail to meet certain obligations, such as not paying property taxes, homeowners insurance, or failing to live in the property as your primary residence.
Can I negotiate with the lender to prevent foreclosure?
Yes, you can negotiate with the lender to explore alternatives to foreclosure. It is advisable to contact your reverse mortgage lender as soon as possible to discuss your situation and potential options.
How much time do I have before the foreclosure process is completed?
The timeline for foreclosure can vary depending on state laws, lender policies, and individual circumstances. It is important to consult with an attorney or housing counselor who can provide specific information based on your situation.
How will foreclosure impact my financial situation?
Foreclosure can have serious financial consequences, including the loss of your home, damage to your credit score, and potential tax implications. It’s crucial to seek professional advice to understand the specific impact on your situation.
Can you walk away from a reverse mortgage?
Generally, you can walk away from a Reverse Mortgage if you agree to let the lender foreclose. However, this is not always a good idea as Reverse Mortgages can be difficult to get again and you could lose your equity in the property. If the borrower ceases making payments, the lender may take ownership of the property through foreclosure proceedings without notice, at any time.
Can heirs walk away from a reverse mortgage?
In general, If the property is not occupied, the heirs are no longer responsible for paying off the reverse mortgage. The property is then sold to repay the loan balance. Heirs of a reverse mortgage borrower should contact the lender to formally discuss the repayment of a home equity conversion mortgage. Depending on the timeline, heirs could refinance the loan in most cases as well. Deed in lieu is not a foreclosure but is an option to transfer the property deed back to the lender with no help from Reverse Mortgage Foreclosure Timeline; it can be completed without any court involvement or delays either.
Can you sell a property once it’s in default and an auction date has been set?
Once an auction date has been set, the property may still be sold by the borrower, through a traditional sale or by finding a buyer who is willing to purchase the property before the foreclosure auction. The sale may be subject to the lender’s approval and may require negotiations to satisfy outstanding debt or liens on the property.
Can the Reverse Mortgage Foreclosure Timeline be extended?
The Reverse Mortgage Foreclosure Timeline is different depending on your state’s laws and how much money you owe on it. It can be anywhere from 180 days to two years for the process to be completed.
Are there any alternatives to foreclosure that I can explore?
Yes, there are alternatives to foreclosure, including loan modifications, repayment plans, refinancing, or even selling the property. These options can help you resolve the delinquency and avoid foreclosure.
Will I still owe money after foreclosure with a reverse mortgage?
If the foreclosure sale does not cover the full outstanding loan balance, you may still owe money to the lender. The specific amount will depend on factors such as the sale price and the terms of your reverse mortgage.
Can you make money from the sale of a home with a reverse mortgage in foreclosure?
If a home with a reverse mortgage is in foreclosure, the borrower may be able to sell the property in order to repay the outstanding mortgage debt and any associated fees and costs. In some cases, if the value of the property is greater than the outstanding mortgage debt, the borrower may be able to make money from the sale of the property. For example, if the outstanding mortgage debt on the property is $100,000, but the property is sold for $150,000, the borrower would receive the excess proceeds of $50,000.
What happens to any remaining equity in my home after foreclosure?
If there is any remaining equity after the foreclosure sale, it typically goes to the borrower or the borrower’s estate. However, it’s essential to consult with a professional to understand the specific rules and regulations in your jurisdiction.
Are there any government programs or resources available to assist me with foreclosure?
There are various government programs and resources available to assist homeowners facing foreclosure. These include counseling services provided by HUD-approved agencies and programs like the Home Affordable Modification Program (HAMP). Contacting a housing counselor or researching government resources can provide valuable assistance tailored to your situation.
Can I still keep my home if I’m in foreclosure with a reverse mortgage?
In some cases, it may be possible to keep your home even if you’re facing foreclosure. Exploring alternatives like loan modifications, repayment plans, or refinancing can help you retain ownership.