- MemberApril 1, 2022 at 4:31 pm
I want to purchase a family members house but it has a reverse mortgage on it. The owner is deceased and the heir has not paid any taxes or insurance currently. They have not foreclosed on the house yet due to a relative still living their and they could not foreclose on it if a relative was still living there if my understanding is correct but will when the relative passes or moves. If I understood correctly from what the heir told me. Also the mortgage company has sold the house to HUD so now HUD owns it and the heir said HUD will only sell the house for the loan amount they won’t take a offer or any less. I believe the county has it valued around 175K and the loan is still accruing interest and is somewhere around 200K+ I believe. I was told recently the heir can ask for a appraisal from HUD and they would sell it for 95% of the appraised value but this contradicts what they told the heir of not accepting anything less than what the current reverse mortgage loan amount. I wanted to know if that is true and if so I will take that route but if not what are my options.
- AdministratorApril 1, 2022 at 4:40 pm
Hi James, thanks for checking in. For HUD not to foreclose, the relative would have to be a non-borrowing spouse. Otherwise, the loan will need to be settled up one way or the other. The heirs could pay it off or the home will need to be sold to cover the reverse mortgage balance. Also, the most that will ever have to be repaid on the reverse mortgage balance is the value of the home. If the home isn’t worth enough to settle up the entire balance, HUD will cover the shortage out of it’s mortgage insurance fund. The way the home is valued is via an appraisal. If the appraisal comes back less than the reverse mortgage balance, then HUD will cover the shortage. Hope this helps!
- MemberApril 1, 2022 at 5:01 pm
Okay thanks so HUD is responsible for the appraisal and not the heir?
- AdministratorApril 1, 2022 at 5:03 pm
I believe the heir is responsible for the appraisal, but I’m not 100% sure. The heir can find out the exact procedure from the lender servicing the reverse mortgage.
- MemberApril 1, 2022 at 5:17 pm
- AdministratorApril 1, 2022 at 5:23 pm
- MemberApril 1, 2022 at 5:27 pm
Also im pretty sure of this but just verifying the heir will have to pay all the back taxes on house in order to sell it to me?
- AdministratorApril 1, 2022 at 5:57 pm
Unless HUD is insisting otherwise, that’s probably something that would be negotiable with the seller. If the seller is selling the home anyway, there’s probably not any requirement from HUD (that I’m aware of) that the taxes would need to be brought current by the seller as a condition of the sale. HUD is only worried about taxes and insurance being current when the current occupant of the home is a reverse mortgage borrower or non-borrowing spouse and the intent is to stay in the home. Borrowers and non-borrowing spouses are required to keep the property taxes and homeowner’s insurance current to remain in good standing with the HECM reverse mortgage.
James JGuestApril 1, 2022 at 6:04 pm
Okay I know for a fact the insurance and property taxes have not been paid for a few years. So I’m assuming it fall upon me due to them not being able to afford it
- AdministratorApril 2, 2022 at 7:15 am
Hi James, if a lot is owed on the property taxes, I would try working that into the sale price. If you have to come up with a lot of cash to bring taxes current, for instance, then I would try negotiating a lower sales price to cover that. That’s pretty common whether a reverse mortgage is involved or not. Best of luck on that!
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