Due and Payable Timeline

 

Due and Payable Timeline: How long do I or my children have, to pay off the reverse mortgage loan balance?

You do not have a  guaranteed 12 month period to pay off the loan.

Please contact me for additional detailed information on this most important event so that I can explain the facts of repayment.

Unlike a traditional mortgage, the loan is not due until the borrower no longer occupies their home as their primary residence.  As a non-recourse loan there is no personal liability, the loan is only repaid from the property, not from other assets.  If the home is sold for more than the loan balance the borrower or estate keeps the difference. The reverse mortgage does not automatically become property of the lender or bank nor do they automatically start foreclosure.  Foreclosure is the last resort HUD and the loan servicers want to take.

Obviously it is nearly impossible to repay the loan the day it becomes due (the date of death or moving out of the home or not abiding by the terms).  But there are some important details that need to be addressed immediately.  HUD’s requirements which the lender’s servicer must follow, are very strict when it comes to satisfying the reverse mortgage repayment. Servicers are the companies or departments which have mailed the monthly statements, released the line of credit funds or monthly payments, etc. during the term of the loan. The servicer is the first line of communication when the loan comes due and payable.

Communication, communication, communication and more communication with the servicer is of the utmost important when a reverse mortgage borrower is no longer in their home. The borrower or their estate must communicate inside of those first 30 days, contacting the servicer so they can make use of the maximum time allowed by HUD for satisfying the loan. Following is an outline of the steps that must be taken when the reverse mortgage becomes due and payable. For additional information please contact me.

1. Due to death or permanent non-occupancy, the servicer must be notified within the first 30 days of the borrower’s death or permanent departure from the home. Please note it is based upon the actual date of death, it is not based on the date the servicer is notified.

2. The servicer orders an appraisal within 30 days and the estate is asked to respond to a condolence letter returning a written document describing the “intent to satisfy the loan”.

3. This letter to the servicer must be received within 30 days detailing the intentions with the property, proof of executor or trustee of the estate, proof that the property is for sale and in the event of death, a copy of the death certificate.

4.  You do not have a  guaranteed 12 month period to pay off  the loan. Time extensions past this initial deadline can be requested from HUD through the servicer, as long as the information mentioned has been provided in a timely manner. Updates are required every 30 days during any extension period. The loan must be paid within 6 mos. of a repayment event ( death or permanent departure from the home) In some cases, the estate may apply, through the servicer, for up to 2 90-day extensions from HUD.

5. Please note that interest, service fees if applicable, and mortgage insurance fees will continue to accrue during the extension period. Why keep the property any longer than necessary? The loan balance is growing larger. The estate is also expected to pay applicable property taxes and insurance while determining the best way to repay the loan through a sale or refinance.