Reverse Mortgages are a financial creature unto themselves. And these days, it is becoming more common for the heirs of an estate to find themselves in the middle of a HECM conundrum.
HECM stands for Home Equity Conversion Mortgage, also known as a Reverse Mortgage. This is a mortgage program which enables the elderly (62+) to withdraw some of their equity in their home without having to make any payments.
What is often not known, is that the heirs have 6 months to pay back the balance to the lender, or the house will go into foreclosure. This 6 month time limit starts ticking immediately upon death. In the situation of the borrower vacating the property and relocating elsewhere, the time usually starts upon notification of acknowledgement of vacated property.
Unfortunately heirs are often grief stricken and postpone addressing estate issues until a later date, completely unaware that the lender's clock has already started ticking! In order to save the property or it's equity, they need to act ASAP!
WHAT TO DO:
1) Determine your intentions. Do you want to keep the property? Do you want to sell the property? Do you want to let the property go back to the bank via a Deed In Lieu?
2) If your decision is to keep the property or let it go back to the bank, you will need to contact the lender and notify them of your intentions. If your decision is to sell the home in order to cash out it's equity, you'll need to contact a Real Estate Agent who is knowledgeable of HECM loans so they can begin to assist you with the process.
3) You will need to notify the lender in writing that you (as the Estate holder), grant said Real Estate Agent permission to access loan information.
4) Within 30 days the lender will have an appraisal done. If the mortgage balance exceeds the appraised value of the home, the heirs have the option of satisfying the reverse mortgage by paying 95% of the home’s current appraised value. If the appraised value exceeds the balance owed, and would leave the heir with equity to obtain, the lender's balance would be paid, (along with any fees and sales expenses) via the sale of the home. The heir (or the estate) would then receive the equity remaining, at closing.
If you have any questions regarding the Reverse Mortgage process, or if you would like assistance with selling your loved one's home, please contact: