My mom is 65 and did a reverse mortgage. Are her kids responsible in any way?
Answers
If your mother took out a reverse mortgage on a home that she owns in her own name, you and your siblings have no obligations.
You don't say whether your mother's home is partially owned by any of her children (she wouldn't have been able to get a reverse mortgage if any of the homeowners on the title were under the age of 65.) If you or your siblings are on the title, you would have been required to sign off on the reverse mortgage as a co-applicant. In that case, you would be legally obligated by the terms of the loan.
If your mother sells her home or if the home is passed on to you or your siblings when your mother dies, you will then be faced with the task of paying back the reverse mortgage. You can do this either by selling your mother's house or taking out a traditional mortgage and paying off the reverse mortgage with the proceeds of that loan.
What if the property is worth less than the mortgage balance? Can the heirs simply give the lender the keys and title to the property without being hit with a deficiency judgment?
Can the heirs simply give the lender the keys and title to the property without being hit with a deficiency judgment?
Yes. The Lender will foreclose on the property, and recover as much as possible from the sale, and file an insurance claim with HUD to recover the difference.
Fred Thompson is forever on TV trying to sell the reverse mortgage. I don't see any benefit to homeowners. Is there any? It seems after paying costs to obtain this monthly check for outstrips any benefits. Please, can you explain benefits, if any?
The primary benefit is being able to convert equity into cash without a monthly mortgage payment obligation. And costs have come down dramatically. Last Summer, for many of my clients, I paid 100% of their fees. And HUD recently launched the "Saver" program, reducing the FHA insurance premium substantially.
