Fox News Talks Reverse Mortgages, Homeownership and Death

The latest in a series of consumer-facing media attention for reverse mortgages, Fox Business News addresses several concerns regarding what happens to the property in the event of a borrower’s death.

An anxious reverse mortgage heir wrote a letter to Fox’s “Ask the Experts,” expressing his concern for what might happen to his borrowing father’s home when he eventually passes away. 

Specifically, the heir inquired about whether or not the lender takes control of the house following the borrower’s death and if the mortgage company requires the balance of the loan be repaid. 

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“Any remaining equity remains with the homeowners,” the reply from Fox News writes. “If your father stays in the home until he dies, whoever inherits the home would have to pay off the loan balance.”

The article then goes on to suggest how the heir can repay the loan balance, offering methods such as selling the home or taking out a conventional mortgage on the property.

Additionally, Fox News also discloses that reverse mortgage lenders are required under federal law to provide up to a 30-day window for heirs to determine what they’ll do with the property. Should an heir choose to retain the home, they will then be allotted up to six months to arrange a sale or financing.

Fox News is the most recent mainstream publication to dip into the Q&A realm of reverse mortgages, with others like the Chicago Tribune and the Tampa Bay Times addressing readers’ various questions, comments and concerns in the past week. 

Read more at Fox Business News.

Written by Jason Oliva

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  • When it comes to HECMs, foreclosure seems to be generally misunderstood. For example some claim that with FHA HECM insurance borrowers do not have to worry about foreclosure other than through default of not paying taxes or insurance. Yet the biggest number of HECMs facing foreclosure today are those which have become due and payable due to the death of the borrower and the home is simply underwater (i.e., the balance due exceeds the value of the home) and not even a payoff amount of 95% of the current appraised value is luring a significant number of estates or eligible heirs to rescue the home from foreclosure.

    Here is another misconception about foreclosure on a HECM from the article: “Failing that, the lender could take control through foreclosure and sell the property. Even then, any remaining equity from the proceeds remains with the estate, not the lender. If you’re worried that your father’s estate won’t retain the appreciation in property values, worry no more.”

    Like all foreclosures, equity follows title. Once foreclosure is complete, the foreclosing lender is not required to pay anything from the subsequent sale of the home to the borrower, or to his/her estate or heirs.

    However, it is extremely rare for the lender to obtain any equity through the sale of a home which was acquired through foreclosure. The costs of the foreclosure plus repairs and maintenance plus the balance due on the HECM which was foreclosed upon usually results in an overall loss to the lender.

    If the borrower, estate or heirs want to keep what equity there is in the home when the HECM becomes due and payable, they must successfully conclude a sale of the home or its refinancing otherwise they will generally receive nothing after foreclosure occurs.

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