Trying to Stop Foreclosure With a Reverse Mortgage

foreclosure7ea2213881eb40c8a6a5a3acb45d044a2 It’s no secret that foreclosures are becoming a problem across the nation and recently I began working with a senior to try and stop the foreclosure of her home with a reverse mortgage.  Apparently I’m not the only one doing this because yesterday the WSJ published a piece on this to.

The senior turned 62 a little less than a year ago and her foreclosure notice came just about the same time.  I’ve spent at least 6 months working with the borrower who was originally hesitant to use a reverse mortgage in order to prevent losing her home.

The borrowers home was recently appraised at $175,000 and her previous mortgage balance before the foreclosure process began was about $89,000.  Today, her current balance with the lender is around $106,000 when you add on other fees that the lender has added on during the foreclosure process.  By using a reverse mortgage she is about $6,000 short of what she needs to close on her reverse mortgage.  My hope is that the lender who recently closed shop will accept a short payoff… has anyone done anything like this before?

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I’ve been working with a fantastic woman from the Illinois States Attorneys Office who also is a reverse mortgage counselor for AARP.  She has been in contact with the lender asking if they will accept a short payoff on the loan and they understandably wanted to see an appraisal and the summary of how the numbers would work for a reverse mortgage. 

Late last week I received the appraisal and forwarded in on to the woman and now all I can do is wait…  I’m not sure if this will work but I figure it’s worth a shot if it would save the woman from foreclosure.

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  • Why does the CEO of Litton loan Service as guest speaker for the Banks talk how banks must try to help borrowers remain in their homes with forebearence program but can not get his bank to work with my reverse mortgage borrower on a jumbo wgo has a hardship problem. I have saved many seniors thru there foreclosure problems but never have had such problems with Litton,

  • Why does the CEO of Litton loan Service as guest speaker for the Banks talk how banks must try to help borrowers remain in their homes with forebearence program but can not get his bank to work with my reverse mortgage borrower on a jumbo who has a hardship problem. I have saved many seniors thru their foreclosure problems but never have had such problems as I have with Litton Loan Services.

  • We see quite a bit of this in FL. In fact, the St. Petersburg Times business section front page had an article this week on just this situation. The senior was in an adjusting ARM and the Lender, Fremont, accepted a short payoff one day before the home was to go to auction.

    I have many clients who actively prospect for seniors in “pre-foreclosure”, with or without Option ARM resets pending.

  • I have worked with the same contact at the State of Illinois Attorney General’s Office in obtaining a short sale to “reverse out” a borrower who owes more than the RM permits. It’s a great tool to use to keep a senior borrower in their home.

  • I’ve counseled a few seniors facing foreclosure. All of my situations have included seniors whose children wanted to inherit the home, so I’ve had to heavily emphasize the idea of continuing to make payments on the RM so that the balance doesn’t rise to the level of being unaffordable. And yes, your contact at the AG’s office is outstanding. I laughed out loud when I read that because all of the IL counselors know exactly who you’re talking about!

  • If the reverse mortgage covers all but an amount due that represents less than about 6% of the true market value of the home (and in your case it does), then I suggest you seek a subordination for the $6,000 from the lender. Virtually all banks will say they will not subordinate to a reverse mortgage. But I just convinced my bank to do a $20,000 subordination on a house valued at around $410,000. It took agreement from people in underwriting and subordination, but if you remind the risk management people that foreclosure costs banks about $50,000 each, and that a reverse mortgage is going to “bring” into the bank a significant sum of money that they are not likely to get absent a reverse mortgage, and that the reverse mortgage does not expect to be repaid until the borrower(s) sell or pass away, and that it is much more probable that the borrower will be able to make a fully amortized payment on a balance of $6,000 every month (ensure that the borrower can) than on $89,000, given the choice between foreclosure and subordination, if they have any financial savvy, compassion, and moxy, they’ll go for the latter.

  • With the state of the lending industry where it is, I am hoping that in the future, lenders will be more forthright and work with you (us)in these precarious situations. The fees incurred during a foreclosure can be huge. I have worked with a lender (no longer in business) who refused to reduce the fees incurred over several months. This accumulation of fees is what put the borrower over the top for a reverse mortgage. It would have saved her home, as well as the emotional turmoil throughout the process.

    Great comments and feedback from your readers!

  • RE: William J. Green

    William, although you are right about a subordination being a good solution for some foreclosure issues it is also important to keep in mind that most, if not all, Reverse Lenders will decline a subordination from a well known lending institution like a Countrywide or Litton. I know because I had a client trying to sub a CW loan and our Senior UW turned it down due to possible payment issues at time of maturity. I believe you will find this to be true of most UWs seeing as risk really isn’t their thing. It is however acceptable to sub IRS liens, judgments, private mtgs, county mtgs, etc. I have had all of the above listed items successfully subordinated except a judgment. I do not want to discourage other LOs from trying to suceed where I have failed, I just feel it necessary to warn you that you are best off making sure your UW will accept your sub prior to doing the work. I commend all those out there that try to think outside the box when it comes to RMs and Foreclosures. The overall improtance of having “other” solutions to common problems such as being “just barely in the red” is unparelled and I have found, as I am sure Larry Batch will agree:), that using unorthidox tatics often yeild great results. I want to hear more on this topic from other LOs. Let’s hear what your experiences have taught you!

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  • I do not quite understand would I put my Daqughter on the Deed then get a reverse mortgagee? if I wished for her to inherit the house, or will she loose any entitlement to my home when I die, I bought this home with the intent of leaving it to her ,If I get a reverse mortgage where dose that leave her.I recently lost my job so I nee4d to do something…please respond

  • I have had several reverse mortgages and thought they were great. I was put in one that turned into a nightmare. It was a new program with Virtual Bank in Florida. I was not informed it did not have government insurance, and also told that what was left would earn a certain amount of interest. I left l/2 of it in there. Now that I want it, they informed me that there might not be any money there. They also are always gone from their desk, and I have talked only a few times. They are rude, and now sent a letter saying we should get a new loan with another mortgage co., and the numbers do not work for me as the value has gone down. I noticed that there was a clause that said if the value of the home fell below what was owed, then they could decide if they wanted to give the rest of the money. I now have been informed to get a new appraisal for a new loan, although I have informed the new company that the numbers do not work for me any more for a new one. I was not counseled as I can recall about this being a non-insured government loan, which means I will probably not get the rest of the money. My husband just died and I now have this stress on me, and have counted on the money being there. They did not even give me over the last two months a statement with the available funds on it, as it was left blank. When I inquired about that, they said they changed their forms. This is what puts a bad light on this type of loan. People who are protecting themselves rather than the seniors. My loan is #33, so it came and went very quickly, and now I am left hung out to dry.

  • If you want to really help the person and they are $6,000 short, start with your commission and the lender’s cut. That’s what I did. I did the loan free and talked to the Lender to see if they would waive the fees as well. They were still msking money on the servicing. Long story short, I saved their home. I didn’t get much recognition from the lender for my “good deed” as I don’t think they wanted to advertise they would drop fees to help seniors in foreclosure? Good luck!

  • my mom had a reverse loan on her house. She past way, and now we are looking for someone to pay off the loan, and get repaid through montly installments. Please help me save my house.

  • I am in dire need of assistance in applying a RM. I’m $18,000 short to close. ($8,000 toward 1st mortgage to Countrywide and $10,000 on 2nd mortgage w/GMAC). Pls contact me if you have experience in a short payoff using a reverse mortgage. I’m turning 65 next month, layed off 8 months ago, I’m not yet in arrears (but I can’t make this months mortgage). Do I or do I not pay this month’s mortgage? Do I have to fall into arrears to even get the mortgage company [Countrywide] to be open to negotiate??? PLS HELP. Not only am I going nuts, but I’m driving everyone else nuts as well. Thanks in advance and any and all advice or assistance.

  • My grandmother got a reverse mortgage, and thereafter passed away. Grandma's will left the house in trust to my mother. It has been one year since my grandmother passed away and my mother does not qualify for a loan as she only receives minimal Social Security of about $450 per month. She tried to get a reverse mortgage herself but does not qualify because of the housing crash left no equity in the home. Original apprasied at $275,000 the market now values the home at $120,000. The amount due to Freedom Financial is $136,000. What we due to save her home? Can anyone help.

  • My grandmother got a reverse mortgage, and thereafter passed away. Grandma’s will left the house in trust to my mother. It has been one year since my grandmother passed away and my mother does not qualify for a loan as she only receives minimal Social Security of about $450 per month. She tried to get a reverse mortgage herself but does not qualify because of the housing crash left no equity in the home. Original apprasied at $275,000 the market now values the home at $120,000. The amount due to Freedom Financial is $136,000. What we due to save her home? Can anyone help.

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