A home equity conversion mortgage (HECM) is a reverse mortgage. In an HECM loan, a lender advances money to a homeowner older than age 62 who resides in the home as a primary residence. The loan can be made in a series of fixed monthly payments, by issuing the borrower a line of credit on which the borrower may draw, or a combination of the two. The HECM borrower is not required to make any payments on the loan so long as he or she remains in the house. The lender collects the loan balance -- which includes the accrued interest and other charges as well as the amounts paid out -- when the house is sold or the owner dies. It is standard in a reverse mortgage that the loan comes due when the last mortgage holder dies or when he or she leaves the home. Collecting on the monies that were disbursed to your mother, plus the interest that has accrued, was the basis of the lender making the loan in the first place.
How much is owed on the reverse mortgage depends on how much your mother borrowed and how much interest has been charged. An heir can keep the home or choose to sell it. An heir is not liable to pay fees to the reverse mortgage company, but does have to pay off the loan. During the time that it takes for the loan to be paid off, interest charges may continue to accrue, depending on the contract terms. An heir can borrow money, obtaining his own loan, if he qualifies. He or she (or they) can also choose to sell the home, paying off the remaining balance with the rest of the proceeds going to the estate to be disbursed according to the terms of the will. If there is not enough equity in the home to pay the balance owing on the reverse mortgage, the heirs are not liable for any shortfall.
Unfortunately, real estate values have fallen in many areas, so it has happened that what was borrowed by the reverse mortgage holder ends up being greater than the current market value of the home. Again, if that turns out to be the case that the sale of the house to a third party, at a fair-market price, does not cover the amount owed, the heir is not responsible for the remaining balance owed. The mortgage holder is left with that loss as a cost of doing business.
I realize that you want to reach the lender but are having problems doing so. Are you the executor of your parent's estate? Is there an attorney handling any probate or estate issues? The HECM issuer has a lien on the property that is a public record. By doing a title search, you should be able to determine who the lender is. It should also show on a credit report pulled in your parent's name. Contact the loan servicing company and to discuss your intentions. Generally, the heir will have several months to finalize a decision on what to do, but the time available to the heir can vary. Find out what timeline the lender expects. Stay in contact with the lender. Let the lender know if the plan is to sell or refinance. It may be necessary to show some proof of the course of action being pursued, such as furnishing the lender with proof that the home is listed or that a loan application is in process, to assure that the lender understands the heir's plans. It is generally not the lender's desire to foreclose on the home, but if the heir is non-communicative and the loan is not being paid back, foreclosure is the only option the lender is left with.
More on Reverse Mortgages
Bills.com has written extensively about reverse mortgages. See the following Bills.com resources to learn more: Reverse Mortgage & Inheritance, Reverse Mortgage and Medicaid, Is a Reverse Mortgage a Good Choice?, Reverse Mortgage Living Trust, Reverse Mortgage Benefits, Reverse Mortgage Refinance,and the Bills.com reverse mortgage information page.
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