Lender Subordinates Loan for Senior to Make Reverse Mortgage Work

image HeraldNet writer Tom Kelly brings up a great point in his column over the weekend when he says that Seniors find a way by asking, ‘What’s possible?’.

While the question might seem simple, Kelly writes that it can spark critical conversations in senior households, especially when times are tough and cash is tight. 

Using one couple as an example, they wondered if a lender with a second mortgage on a property would subordinate its position so a senior could could obtain a reverse mortgage and avoid foreclosure.  It turns out they would…


Here’s how the reverse mortgage solved the dilemma:

The couples’ home value was $235,000 and encumbered by a first mortgage in the amount of $140,000 and a second mortgage of $60,000. After fees, the couple was eligible for a reverse mortgage of $171,000. When the reverse mortgage closed, the first mortgage was paid off and the remaining $31,000 brought the second mortgage current and also bought down a significant portion of the balance.

Seniors find a way by asking, ‘What’s possible?’

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  • Admin,

    Can you interview Sarah Hulbert, a past NRMLA chairwoman? She is the real story here. Tom gets confused.

    For example, there is no way the second stays a second on a HECM transaction. It would be forced to become a third.

    It would be interesting to find out if any modifications to the second transpired before the HECM transaction closed. If not, does she believe they could have? And if so, to what extent.

    Sarah's perspective on HECMs and subordinations would be most valuable.

  • How does new Mortgage Letter 2009-49 play into this? Obviously this was completed before the issuance of this ML Does this ML end all subordinations other than those specifically permitted?

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