Wednesday, April 1, 2020

Can A Reverse Mortgage Lead To Foreclosure?


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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