Reverse Mortgage Inheritance

Before I discuss the facts you raise in your question, let us review reverse mortgage basics.

Reverse Mortgage Basics

A reverse mortgage is a unique mortgage because they are no payments required from the borrower. Instead the homeowner receives cash from the lender and in turn, the lender receives a portion of the homeowner’s equity. A reverse mortgage loan is designed to give older homeowners the ability to receive tax-free income without having to make payments, sell their home or affect their hold on their title. For older homeowners (must be 62 years or older to qualify) a reverse mortgage can be the right way to receive either extra income or security in retirement.

The loan is repaid when the borrower ceases to live in the home. This can be a result of the homeowner selling the home, moving out (and it is no longer their primary residence), or dying. In any of these cases, the lender receives the proceeds of the sale of the home to pay off the balance of the reverse mortgage loan. If the proceeds of the sale exceed the outstanding loan balance, the difference is paid to the borrower or to their estate.

Any heirs to real property take the property subject to its encumbrances. Let us assume for the sake of argument the homeowner with the reverse mortgage had a life insurance policy that paid the beneficiary an amount equal to the market value of the property. Let us say the beneficiary was named in the will to receive the home with the reverse mortgage. Upon the homeowner’s death, the beneficiary/heir will receive the amount in the life insurance insurance policy. The heir also gets the home, but subject to the mortgage. The heir can either use the insurance money to pay off the reverse mortgage, or walk away.

Now let us change the facts slightly. Let us say there is no insurance policy and the homeowner dies. The heir has the option to walk away and receive the proceeds of the sale after the home is sold. Or, the heir may get a conventional mortgage, pay off the reverse mortgage, and do what he or she wishes with the property.

Your Question

You mentioned a will and property inheritance. As discussed above, you inherited the property subject to its encumbrances. In other words, you must either quit the property and allow Wells Fargo to sell it, or you must pay Wells Fargo the balance of the mortgage. You mentioned you want to stay in the property. If so, you must get a mortgage equal to the balance of Wells Fargo’s reverse mortgage.

You mentioned a lawsuit. You did not specify if you filed the lawsuit against Wells Fargo or if Wells Fargo is suing you. If you sued Wells Fargo, I can only imagine you did so on the theory that Wells Fargo did not disclose all of the terms and conditions to your parent, or that your parent was incompetent and did not understand the consequences of her actions, and therefore Wells Fargo committed fraud. If Wells Fargo filed a lawsuit against you, I would imagine it would be a form of unlawful detainer to remove you from the property.

If you have not consulted with an attorney in your state, do so immediately. If you cannot afford an attorney, call your county bar association and ask for the contact information for the organization that assists people in your area with low or no income who have civil litigation questions. Make an appointment with that organization and bring all of your documents relating to the lawsuit and your mother’s will to that meeting. An attorney or paralegal will advise you of your rights and liabilities.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com