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.
She was sincerely interested in the program, but first decided to vent with an amazing story of pain, agony and just downright horror relating to the reverse mortgage.
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).
Well, more money was owed to the lender, at the time of his death, than the home was worth. According to the realtor the mortgage company required repayment of the entire amount owed.
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.
If a deficiency exists at the time of repayment of the reverse mortgage, either the borrower or heirs go through the same drill.
A realtor will be hired to market the property at a fair market value. Yes, the bank will want to know this and will check comparable sold properties to be sure. The house will sell, and the bank will be repaid the sale price minus 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.
This is one of several myths flying about regarding the reverse mortgage. The reverse mortgage may be a strong tool for you to utilize, or a poor choice given your circumstance. But don't assume you know until you really know. Call a professional or two first.
She was sincerely interested in the program, but first decided to vent with an amazing story of pain, agony and just downright horror relating to the reverse mortgage.
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).
Well, more money was owed to the lender, at the time of his death, than the home was worth. According to the realtor the mortgage company required repayment of the entire amount owed.
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.
If a deficiency exists at the time of repayment of the reverse mortgage, either the borrower or heirs go through the same drill.
A realtor will be hired to market the property at a fair market value. Yes, the bank will want to know this and will check comparable sold properties to be sure. The house will sell, and the bank will be repaid the sale price minus 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.
This is one of several myths flying about regarding the reverse mortgage. The reverse mortgage may be a strong tool for you to utilize, or a poor choice given your circumstance. But don't assume you know until you really know. Call a professional or two first.
About the Author:
Get 6 more myths revealed plus 5 major mistakes at the Texas Reverse Mortgage Guide. To learn some great questions to ask try 5 hard hitting questions for the mortgage company before getting your Reverse Mortgage in Texas.
posted by Credit Counseling at
5:19 AM
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