Chicago Tribune: Must-Knows When Inheriting a Reverse Mortgaged Home

The Chicago Tribune offered its readers some need-to-know advice when inheriting a home from a parent that has taken out a reverse mortgage. 

Claiming that many aging homeowners may have opted to obtain reverse mortgages during the economic crisis, the Tribune article outlines several options heirs have when they’ve inherited a home that has a reverse mortgage. 

The Tribune informs its readers that heirs can choose to pay off the loan if they want to keep the property, using either their own finances or via refinancing into their heirs’ names, or can opt to deed the home back to the bank holding the reverse mortgage on the property. 

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“In some cases, though rare, the heirs choose to abandon the home and the estate becomes property of the bank,” said Neena Vlamis, president and co-owner of A and N Mortgage, in the article. “It’s important that the heirs discuss their options with a financial planner or mortgage professional to determine what makes the most sense financially.”

Read the Chicago Tribune article

Written by Jason Oliva

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  • “In some cases, though rare, the heirs choose to abandon the home and the ESTATE becomes property of the bank….” (All caps added for emphasis.) Looking at the Chicago Tribune article, Mr. Olivia correctly quotes the statement credited to Ms. Vlamis by Ms. Flanigan.

    Either Ms. Flanigan misquotes Ms. Vlamis or Ms. Vlamis is ignorant about the nature of nonrecourse mortgage foreclosures. In either case, the estate does not become the property of the bank unless the collateral for the HECM is the only asset in the estate!! To the extent that the collateral is insufficient to pay off any recourse liens on the property, the note holder can sue the estate, etc. for deficiencies.

    Deed in lieu of foreclosure is generally preferable for the estate or trust, and thus the heirs or beneficiaries, since submitting the deed relieves the property owner of any further possible recourse liability for insurance, taxes, or home owner association dues. Abandoning the property does not generally cut off liability for these costs if the estate or trust had other assets as these costs became due and payable (or distribution if such assets were distributed before the costs became due and payable) until someone else takes title to the property.

    Since other considerations can enter into the decision about how to dispose of property in an estate or trust, it is best for the executor, administrator, or trustee to seek the advice of an attorney who is competent and experienced in such matters.

    (The opinions expressed are not necessarily those of RMS or its affiliates.)

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