Be Wary of Reverse Mortgage Folklore
I received a phone call from a local real estate professional. She called in response to an ad I placed detailing how seniors can buy a home using the reverse mortgage to fund the purchase.
She was sincerely interested in the program, but first decided to vent with an amazing story of pain, agony and just downright horror relating to the reverse mortgage.
Now, in an effort to put the kibosh on the horrible results of a reverse mortgage going viral and thus wrecking my business, I need you to keep reading past the next few paragraphs. You might stop reading and tell your friends about this horror. And they might believe you.
Like most stories that may not be true the story is told second, third or fourth hand. In this case, the agent had a girlfriend, who's friend's father had a reverse mortgage on his home. After his passing the home made it's way into the hands of the FOAFOAR (I'm going to use this acronym for the Friend Of A Friend Of A Real estate professional).
It's a bit of a rareity but the home was valued less than the mortgage amount. It can happen with drastically falling values. Naturally, when her father passed away the mortgage company called the entire note due.
The property eventually sold to repay a portion of the money owed the lender. The lender forced the FOAFOAR to pay the remaining balance of forty-thousand-dollars.
Did this happen? I seriously doubt it. The reason is reverse mortgages are known as non-recourse loans. This means in the circumstance of the FOAFOAR the mortgage company cannot come after the heirs for the difference.
If there is negative equity at the time the home is to be sold, either voluntarily by the borrower or after death by the heirs, the process is the same.
The home will be sold at a fair market value. The lender knows this because it requires the borrower or family to hire a licensed realtor to list and sell the home. When the house finally transfers to the new owner, the lender is repaid the price minus closing costs to sell the home.
This net figure is the maximum amount the bank has a right to extract, and can't come back after the borrower or borrower's heirs for the remaining balance of the loan. The bank eats the difference, and is reimbursed by FHA mortgage insurance.
This is one of several myths flying about regarding the reverse mortgage. The reverse mortgage may be a strong tool for you to utilize, or a poor choice given your circumstance. But don't assume you know until you really know. Call a professional or two first. - 16931
She was sincerely interested in the program, but first decided to vent with an amazing story of pain, agony and just downright horror relating to the reverse mortgage.
Now, in an effort to put the kibosh on the horrible results of a reverse mortgage going viral and thus wrecking my business, I need you to keep reading past the next few paragraphs. You might stop reading and tell your friends about this horror. And they might believe you.
Like most stories that may not be true the story is told second, third or fourth hand. In this case, the agent had a girlfriend, who's friend's father had a reverse mortgage on his home. After his passing the home made it's way into the hands of the FOAFOAR (I'm going to use this acronym for the Friend Of A Friend Of A Real estate professional).
It's a bit of a rareity but the home was valued less than the mortgage amount. It can happen with drastically falling values. Naturally, when her father passed away the mortgage company called the entire note due.
The property eventually sold to repay a portion of the money owed the lender. The lender forced the FOAFOAR to pay the remaining balance of forty-thousand-dollars.
Did this happen? I seriously doubt it. The reason is reverse mortgages are known as non-recourse loans. This means in the circumstance of the FOAFOAR the mortgage company cannot come after the heirs for the difference.
If there is negative equity at the time the home is to be sold, either voluntarily by the borrower or after death by the heirs, the process is the same.
The home will be sold at a fair market value. The lender knows this because it requires the borrower or family to hire a licensed realtor to list and sell the home. When the house finally transfers to the new owner, the lender is repaid the price minus closing costs to sell the home.
This net figure is the maximum amount the bank has a right to extract, and can't come back after the borrower or borrower's heirs for the remaining balance of the loan. The bank eats the difference, and is reimbursed by FHA mortgage insurance.
This is one of several myths flying about regarding the reverse mortgage. The reverse mortgage may be a strong tool for you to utilize, or a poor choice given your circumstance. But don't assume you know until you really know. Call a professional or two first. - 16931
About the Author:
Learn about other folklore plus the Quintessential Guide to the Texas Reverse Mortgage. For great questions for your lender try 5 hard hitting questions for the mortgage company before getting your Reverse Mortgage in Texas.
posted by Edgar at
05:00
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