Many people who are interested in getting a reverse mortgage
are wondering if this type of loan could lead to a foreclosure. The answer is
yes. But there’s one important thing that you need to know. The circumstances
that would cause a reverse mortgage foreclosure are different from the
situations leading to a conventional mortgage foreclosure. If homeowners hear
about foreclosure, they immediately think about failing to make the needed
monthly payment for the mortgage. Well, this doesn’t really apply to a reverse
mortgage loan since it does not carry any monthly repayment obligation.
It’s no wonder many people and even the media get a lot of
things wrong about reverse mortgage foreclosures. It’s crucial to note remember
that a foreclosure could be the resolution of a reverse mortgage loan once the
borrower dies. In case the balance that’s due goes beyond the value of the
loan, or if the late borrower has no next of kin to take care of the sale, the
estate would just let the home go into a foreclosure.
Factors Leading To Reverse Mortgage Foreclosure
Why Foreclosures Happen?
Although reverse mortgages do not need a monthly principal
as well as interest mortgage payment during the loan’s duration, there are
other obligations that the borrower need to fulfill like maintaining the home
and paying all property related costs. Ignoring these costs would lead to loan
maturity. If that happens, the loan borrower or the heirs would end up selling
the house to pay off the balance on the loan. In case there’s no action to sell
the house, the lender would have to foreclose on the house and deal with the
sale on their own so that the loan could be repaid.
No Equity Remains At Reverse Mortgage Loan Maturity
The loan balance in some cases goes beyond the reasonable
sales price of the house if the loan matures. In this situations, they don’t
have any economic incentive to sell of the house on their own. Fortunately,
reverse mortgage loans are considered non recourse loans and provide them the
chance to just walk away even with a loan deficiency. This should not affect
their credit profile. However, the HUD is given the title to the house through
foreclosure, allowing them to sell the house and pay off at least a part of the
balance of the loan.
A Property Tax Default Happens
Not being able to pay the property taxes will almost always
lead to foreclosure. This holds true if the homeowner has a conventional
mortgage, reverse mortgage, or not mortgage at all. Unfortunately for the
lender, they’re the primary lien-holder on the house and are mandated by
federal rules to foreclose on the house for most reverse mortgages loan. In
2015, the HUD created a mandatory financial assessment of each borrower that
has significantly decreased the number of property charge defaults.
Always remember that a reverse mortgage Greenville lets the homeowner
gets access to funds that would in theory, lower the likelihood that a borrower
would default on their payment obligations. However, with the rising financial
pressures of going into retirement, people can’t always expect a perfect
outcome.
Call Reverse Mortgage Specialist if you want to know more about this loan and if you need professional help in deciding whether this is the best option for your retirement plan.
David Stacey
Reverse Mortgage Specialist
Greenville, SC 29607
864 920 2733
http://reversemortgagegreenvillesc.com/
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