Reverse Mortgage

[Zee09]

Seen a whole bunch of adverts this morning
Just a question ( not about me or anybody I know and of course not really a sound thing but...…….)

Is there a law against more than one property put into a RM plan?
Like the guy who has several houses etc. in the same state or other states and even countries.
I realize you could sell said properties and put the money in high interest funds etc. But that's not the question.
For conversation only. Just wondering how tightly regulated these are.

 

[NormanBuntz]

I believe the rules allow a RM only for a primary residence for an owner 65 or older.

 

[knerml]

Originally Posted by NormanBuntz
I believe the rules allow a RM only for a primary residence for an owner 65 or older.

Agree. You need to be occupying the house. If you move out of the house for any reason without paying off the mortgage, say you go into a nursing home, they can foreclose.

 

[BMWTurboDzl]

One of the problems with what you're talking about is that states/countries have different laws regarding foreclosures. For example there are states which have judicial or non-judicial foreclosures. That causes problems for a lender if one property is located in a state with judicial foreclosure and the other property is not.

A RM is only as sound as the appraisal on which it is based. For example FHA recently reported that they have a group of RM's with inflated appraised values and IIRC these RM's were limited to a handful of appraisers.

RM's are a good idea for some people (ex, over 70 and own an expensive home free and clear).

 

[BMWTurboDzl]

Originally Posted by knerml
Originally Posted by NormanBuntz
I believe the rules allow a RM only for a primary residence for an owner 65 or older.

Agree. You need to be occupying the house. If you move out of the house for any reason without paying off the mortgage, say you go into a nursing home, they can foreclose.


I don't know why that should matter. I can't see lenders doing an occupancy check.

 

[Wolf359]

Originally Posted by BMWTurboDzl
Originally Posted by knerml
Originally Posted by NormanBuntz
I believe the rules allow a RM only for a primary residence for an owner 65 or older.

Agree. You need to be occupying the house. If you move out of the house for any reason without paying off the mortgage, say you go into a nursing home, they can foreclose.


I don't know why that should matter. I can't see lenders doing an occupancy check.


They don't, but when you move out, things tend to change like driver's license, type of insurance, where things get mailed etc. They can figure it out without doing a drive by.

It only works in a very limited case. The gamble is that you're going to live longer than they think so you'll get more out of it. They're betting you're going to die sooner or move out.

 

[maxdustington]

It's a scam to foreclose. That's why they target people at the end of their life who possibly have reduced mental capabilities or are one injury away from assisted living. Fixed income desperation is the key motivator.

 

[Pelican]

Originally Posted by BMWTurboDzl
One of the problems with what you're talking about is that states/countries have different laws regarding foreclosures. For example there are states which have judicial or non-judicial foreclosures. That causes problems for a lender if one property is located in a state with judicial foreclosure and the other property is not.

A RM is only as sound as the appraisal on which it is based. For example FHA recently reported that they have a group of RM's with inflated appraised values and IIRC these RM's were limited to a handful of appraisers.

RM's are a good idea for some people (ex, over 70 and own an expensive home free and clear).


RM are not a good financial investment for the owner, period! It's very good for the lending party though. One must have a very good reason for a RM vs an outright sale, this is mainly an affective reason and mostly related to people in the 80s without heirs and who do not need assistance.

 

[WyrTwister]

So , if you move out & go into assisted living or a nursing home , you forfit the house ?

 

[Zee09]

I agree. It goes against my moral fiber.
I'm not in that age range but I most likely would be a good candidate.
I really have no heirs, a few I could have already stuck me with mortgages they never paid and I would
have a large paid for house in a good area to live in and use the money as living $$$
In the end a big old house can't do nothing for a dead man and the losers around me would just you know

I personally don't like the concept and who it targets though.

 

[Zee09]

Originally Posted by WyrTwister
So , if you move out & go into assisted living or a nursing home , you forfit the house ?


That would be a long stretch. You could put it on the market etc.
in the end the nursing home would get it anyway.

 

[DB_Cooper]

Just a note concerning my Mother's condo and her RM when she passed away. I was the executor for the estate and when she passed the RM lender is not "foreclosing" as it were. It is a binding contract lien recorded with the deed. What if fact happens is there is a sort of annuity that is being paid on the presumptive value of the property. I say a sort of annuity at if the RM recipient lives to be 150 years old..the RM may pay out that long. However the actuaries at the RM companies are very good. They know, more or less, what the life expectancy is of the RM recipient vs. the value of the property. The RM loans are also "guaranteed" by Uncle Sam (the taxpayers) too. The banks/lenders have no real risk as long as the original appraisal is sound. The government had to guarantee these loans to create the RM marketplace for seniors to begin with. This sound familiar? It should.

There is a "trigger" when the recipient dies the payments end and the "estate' can surrender the property to the RM lender or buy the property from the RM company for the payments made plus interest and fees.

What was shocking to me was the surprise fees, interest + monthly fee, commissions and expenses that were loaded into the RM note..literately many thousands of dollars that I could not get the RM lender (Bank of America) to explain. No amount of phone calls or letters generated any kind of reply. The bank costs ballooned the buyout too high to justify the estate buying the note back. Add in the overall opinion of the family was to let the condo go as it may be too hard for one of us to live there.

So BoA sells the condo via a local real estate agent. After listing the condo for an unreasonably high amount. And the estate only has so much time to liquidate assets..the property sold to the highest offer for about two thirds of that original RM buy out amount from BoA. So Uncle Sam must have paid out the difference!

My advise is be VERY CAREFUL with a RM. Some cases may be justified but, as we know, banks love their fees, particularly hidden fees. Add in the "no risk" Federal guarantee feature of the RM now you know why you see those advertisements on TV all on the time. Just be careful.

 

[BMWTurboDzl]

Originally Posted by Wolf359
Originally Posted by BMWTurboDzl
Originally Posted by knerml
Originally Posted by NormanBuntz
I believe the rules allow a RM only for a primary residence for an owner 65 or older.

Agree. You need to be occupying the house. If you move out of the house for any reason without paying off the mortgage, say you go into a nursing home, they can foreclose.


I don't know why that should matter. I can't see lenders doing an occupancy check.


They don't, but when you move out, things tend to change like driver's license, type of insurance, where things get mailed etc. They can figure it out without doing a drive by.

It only works in a very limited case. The gamble is that you're going to live longer than they think so you'll get more out of it. They're betting you're going to die sooner or move out.


Having 20 yrs in the industry I know for a fact that borrowers are NOT held to occupancy status on a mortgage loan. They're just not because lenders know that the living situation of an individual can/does change and it's generally very difficult as well as very expensive to prove intent in a court room.

 

[BMWTurboDzl]

Originally Posted by Pelican
Originally Posted by BMWTurboDzl
One of the problems with what you're talking about is that states/countries have different laws regarding foreclosures. For example there are states which have judicial or non-judicial foreclosures. That causes problems for a lender if one property is located in a state with judicial foreclosure and the other property is not.

A RM is only as sound as the appraisal on which it is based. For example FHA recently reported that they have a group of RM's with inflated appraised values and IIRC these RM's were limited to a handful of appraisers.

RM's are a good idea for some people (ex, over 70 and own an expensive home free and clear).


RM are not a good financial investment for the owner, period! It's very good for the lending party though. One must have a very good reason for a RM vs an outright sale, this is mainly an affective reason and mostly related to people in the 80s without heirs and who do not need assistance.


By definition a RM is not an investment so there's no reason to view them through that lens. . Screw the heirs it's not their asset to begin with.

 

[Wolf359]

Originally Posted by BMWTurboDzl
Having 20 yrs in the industry I know for a fact that borrowers are NOT held to occupancy status on a mortgage loan. They're just not because lenders know that the living situation of an individual can/does change and it's generally very difficult as well as very expensive to prove intent in a court room.



Are you talking about regular mortgages or reverse mortgages? I believe on a reverse mortgage, the owner is supposed to occupy the home. On a regular mortgage, the owner is supposed it live in the home for a year, but that is rarely enforced. There are very few people who take out reverse mortgages and of the ones I've heard of, you had to live in the house. Not sure how tough they are about enforcing that.

 

[Zee09]

Absolutely on the banks....
They will run you through the ringer.
I try to avoid them at all cost.
Your family was hurt enough and then had to deal with this nonsense.

 

[BMWTurboDzl]

Originally Posted by Wolf359
Originally Posted by BMWTurboDzl
Having 20 yrs in the industry I know for a fact that borrowers are NOT held to occupancy status on a mortgage loan. They're just not because lenders know that the living situation of an individual can/does change and it's generally very difficult as well as very expensive to prove intent in a court room.



Are you talking about regular mortgages or reverse mortgages? I believe on a reverse mortgage, the owner is supposed to occupy the home. On a regular mortgage, the owner is supposed it live in the home for a year, but that is rarely enforced. There are very few people who take out reverse mortgages and of the ones I've heard of, you had to live in the house. Not sure how tough they are about enforcing that.


My experience is with regular mortgages and yes 1 year is thrown around, but it's really just a scare tactic. In reality it's unenforceable against the borrower. It's also bad optics from a public relations perspective. With a RM there may be an incentive to foreclose because they're not into the house all that much, but like I said, bad optics. The press would have a field day. Besides, there are plenty is situations where an elderly parent has his/her mail delivered to an adult child who is also the legal guardian.

Worst case is parent moves into nursing home and also sells the house.

Overall I might be wrong of course but I'd wager I'm better than even money.

 

[Win]

Banks want money, not real estate.

The loan can be paid off any time, like any other loan with a right of prepayment.

When the mortgagor passes, the balance on the loan becomes due. The estate has to pay the loan. Because the people that get reverse mortgages ordinarily don't have any cash money, the usual way of repaying the loan is to sell the mortgaged property. The excess of the sale price after loan payoff and closing costs goes back into the estate for distribution.

If the estate does not pay back the loan, of course it will be foreclosed on, like any other secured loan. Even then, all the bank wants is their money - they don't want the property. Dealt with this many times.

 

[chemman]

It's a great way to screw one's self out of a lot of money real fast.

My mother got one (unknown to me and my brother) in 1998 on her house that had zero mortgage. She got around $44000 from the reverse mortgage on a house valued around $300,000. When she sold the house in 2006, she had to pay close to $140,000 to the reverse mortgage company at settlement. Plus, unlike interest on a regular mortgage, she could not deduct the interest from her income taxes.

 

[Mr Nice]

Originally Posted by BMWTurboDzl
Originally Posted by Pelican
Originally Posted by BMWTurboDzl
One of the problems with what you're talking about is that states/countries have different laws regarding foreclosures. For example there are states which have judicial or non-judicial foreclosures. That causes problems for a lender if one property is located in a state with judicial foreclosure and the other property is not.

A RM is only as sound as the appraisal on which it is based. For example FHA recently reported that they have a group of RM's with inflated appraised values and IIRC these RM's were limited to a handful of appraisers.

RM's are a good idea for some people (ex, over 70 and own an expensive home free and clear).


RM are not a good financial investment for the owner, period! It's very good for the lending party though. One must have a very good reason for a RM vs an outright sale, this is mainly an affective reason and mostly related to people in the 80s without heirs and who do not need assistance.


By definition a RM is not an investment so there's no reason to view them through that lens. . Screw the heirs it's not their asset to begin with.


Don't forget that many adult children are not financially capable of helping their parents.... so a reverse mortgage might be to their advantage.