How to Handle a Reverse Mortgage After Death.


Handling an estate after the death of a loved one can be stressful. If a family member had a reverse loan, it’s important to understand how to handle a reverse mortgage after death. If you’re the surviving spouse, you’ll want to know your options and responsibilities. If you’re one of the heirs, you have certain duties and decisions you’ll need to make. Whether you want to keep the home or not, you have options. You want to be sure that you understand what they are.

What to do About a Reverse Mortgage After Death

There are five options for handling a reverse mortgage after the death of the borrower.

  • Keep the property. In this situation, you must pay the loan in full, but never more than 95% of the property’s appraised value.
  • Sell the property. If the home is worth more than the loan amount, the heirs may sell the home, pay off the loan, and keep the remainder of the money from the sale.
  • Complete a short sale. Sell the property for 95% of its appraised value in a short sale to satisfy the loan.
  • Walk away. Walking away from the home will result in foreclosure and alleviates any responsibility for paying off the loan.
  • Sign a deed-in-lieu of foreclosure. This titles the property back to the lender. This allows the house to go into reverse mortgage foreclosure and gives the seller the property in order to satisfy the loan.

Reverse Mortgage After Death Timeline

Here’s a timeline of what to expect in order to handle a reverse mortgage after death.

30 days. Within 30 days of receiving notice of the death of the borrower, the loan servicer will send a due and payable notice to the estate, along with information on the reverse loan and the eligibility requirements for a deferral period of the reverse mortgage after death.

60 days. Within 30 days of receiving the due and payable notice, the estate must respond to the notice with a letter of intent as to the property. Additionally, the mortgagees must obtain an appraisal of the property no later than 30 days after the due and payable notice is sent. The surviving, non-borrowing spouse may apply for a deferral if they meet the requirements.

2-6 months. During this time, the estate has the opportunity to sell the house, or otherwise satisfy the loan. Be aware that interest on the loan accrues during this time.

6 months. Within six months of the death of the last surviving mortgagor, the loan servicer may begin foreclosure proceedings if someone does not pay the loan amount. If a deferral has been issued, then the foreclosure proceedings may begin six months after the end of the deferral.

12 months. The estate may apply for two extensions in 3-month intervals. This gives them up to 12 months from the death of the borrower to sell the property or satisfy the loan.

Spouse’s Responsibility for the Reverse Mortgage After Death of the Borrower

When one spouse dies, but the surviving spouse is a borrower on the reverse mortgage, the terms of the loan do not change. Also, the surviving spouse may continue to live in the house.

If the surviving spouse is not a borrower, then the mortgagee will send a letter stating the requirements for a deferral period before the loan is due and payable. If the spouse doesn’t meet a requirement of the deferral period, they have 30 days to remedy the situation. Otherwise, a notice that the loan is due and payable will be issued.

Once receiving a notice that the loan is due and payable, the spouse may choose to sell the home, hand the property over to the lender, or keep the home by paying the reverse loan amount.

During the time after the death of the borrower, the spouse must maintain the property and pay property taxes. Failure to do so may result in action against the spouse by the loan servicer. This may lead to foreclosure on the property.

Heirs’ Responsibility for the Reverse Mortgage After Death of the Borrower

After the death of the borrower, the heirs will receive a letter from the loan servicer. The letter will offer information on the borrower’s estate, details on the reverse mortgage, and available options for satisfying the loan.

It is the responsibility of the heirs to reply to the loan servicer with the intentions of keeping the property, selling it, or handing it over to the servicer. Here’s some advice for children of seniors for handling the reverse mortgage after death.

In order to keep the property, the loan must be paid off. The cost to pay off the loan is never more than 95% of the appraised value of the home, even if the loan amount is more. If the property is worth more than the amount owed, the heirs may choose to sell the home and keep the difference.

If the home isn’t worth as much as the loan, the heirs may choose to sign a deed-in-lieu of foreclosure. This turns the house over to the lender, who will sell it to get their money back. If the loan balance exceeds the home’s value, then you won’t owe anything additional by choosing this option.

Whatever you choose to do, keeping good communication between yourself and the loan servicer is imperative. With the proper documentation, you may have up to a year to sell the home before it must be turned over. If you fail to provide the proper documentation, the loan servicer may begin foreclosure proceedings within six months.

Reverse Mortgage Facts Non-Borrowers Should Consider

Here are a few things you need to know prior to inheriting a reverse mortgage after the death of the borrower.

Understand reverse mortgages. Most reverse mortgages are home equity conversion mortgages (HECMs), which are subject to FHA rules. Non-HECMs may not follow these same rules. Speak with a mortgage professional, accountant, and other trusted advisors to help you understand the ins and outs of a reverse mortgage.

Communicate with the loan servicer. After the death of the borrower, keeping in good communication with the loan servicer is vital to ensure a smooth transition.

Selling the property. If the loan amount is less than the house is worth, then selling the property may make the most sense. Here are some tips when selling a house with a reverse mortgage.

Non-recourse. A reverse mortgage is a non-recourse loan. This means borrowers are never responsible for more than 95% of the home’s appraised value. Even if the loan exceeds that amount.

Avoiding negative financial impact. You may avoid the responsibility of paying the loan amount, including the negative financial impact of the loan amount exceeding the home’s value, by completing a deed-in-lieu of foreclosure, short sale, or by walking away from the home. This will allow the loan servicer to begin foreclosure proceedings.

Six months to complete the transaction. Once you’ve decided to sell the property, or pay off the loan, you have six months from the death of the borrower to complete the transaction. After this time, the loan servicer may proceed with foreclosure.

Time extensions. If you need additional time to market and sell the property before foreclosure proceedings ensue, you may request up to two 90-day extensions. This is subject to HUD approval.

Avoiding foreclosure. If you do not respond to the due and payable notice, if the house does not sell before your extension expires, or the property taxes and insurance are not paid, then the loan servicer may begin foreclosure. Work closely with your loan servicer to assure all documentation is completed properly to avoid early foreclosure.



How Financial Planning is Changing the Reverse Mortgage Training Process

Posted ByJason OlivaOn May 1, 2016


Since the implementation of new rules over the last year, reverse mortgages have been increasingly touted as being more viable retirement tools than they once were, requiring lenders to adapt their training processes to best serve borrowers in this new era of financial planning.

While some lenders may have already been conveying the potential retirement planning benefits of reverse mortgages in their messaging and conversations with prospective borrowers prior to the Financial Assessment, new underwriting guidelines demand originators obtain a thorough understanding of seniors’ personal financial circumstances.

This means not only knowing what bills borrowers face, or how they want to live during retirement, but also having a deeper understanding of their financial situations, including their housing needs, ability to maintain ongoing expenses like property taxes and homeowner’s insurance, and above all, what they plan to accomplish by getting a reverse mortgage.

“At the end of the day, a reverse mortgage is a financial tool that isn’t going to be the right answer for everyone,” said Jud Lyman, training manager with Liberty Home Equity Solutions. “We have to find out if a reverse mortgage is the right answer for borrowers and how we can customize this tool to help them the most.”

Reverse mortgage 101

Liberty’s training for sales associates has focused on the discussion of using reverse mortgages as financial planning tools for several years now, Lyman said, with the Rancho Cordova, Calif.-based company constantly adjusting and modeling its training processes as new regulations come and go.

For all new Liberty hires, Lyman hosts a “reverse mortgage 101” class, which all company sales associates are required to attend. This session not only provides an overview of reverse mortgages, but also explores more complicated subject matter, such as using various HECM disbursement methods to create a solution for whatever needs the borrower has.

“If we’re just helping borrowers pay off their mortgage [with a HECM], we are missing the boat,” Lyman said. “It’s really about understanding the borrower, learning what they need and how you can help them be successful—not pushing a sale.”

But before originators can effectively help prospective borrowers find the right HECM solution that accommodates their particular needs and circumstances, they must first learn how to communicate the potential benefits of a reverse mortgage without over-encumbering the customer with a data-dump of information.

One way to navigate this challenge, Lyman says, is to not discuss the actual HECM product too quickly. This allows the originator to learn more about the client’s situation before discussing technical features like rates, terms and principal limits.

“The individual needs to understand how they are going to benefit from the reverse mortgage before the conversation can really turn to ‘what rate are you going to offer me, and what are the fees?’” Lyman said.

Liberty holds biweekly sales sessions to help its originations team overcome certain challenges they may have faced when speaking with prospective borrowers. The purpose of these sessions is to help sales associates understand the concept behind the reverse mortgage tool and how it can help borrowers’ unique circumstances, rather than just the nuts and bolts of the product.

“It’s not the nuts and bolts of reverse mortgages that are going to get you where you need to be,” Lyman said.

Engaging seniors’ trusted advisers

The Financial Assessment is forcing reverse mortgages to move away from the heavy, needs-based borrower of the past who may not have been viable candidates under these new underwriting rules, to retirees who are now looking for another solution to add to their retirement planning tool belt.

As loan originators have conversations with seniors about reverse mortgages being new and improved financial planning resources, it is important that they continue to stress the safety and soundness of the HECM product, especially as compared to the product of old, says Mike Crossett, executive vice president at The Federal Savings Bank in Chicago.

“As we sit down to discuss the new HECM with customers and look at it from the financial planning perspective, we like to keep it at a very conceptual level and keep it simple, at least in early discussions,” Crossett said.

In the past year since the Financial Assessment’s implementation April 27, 2015, The Federal Savings Bank has increased the level and depth of training for its origination staff, in efforts to make sure they understand the fundamentals of the new program changes, as well as to teach originators how they can work within these new guidelines to help borrowers obtain a HECM that is right for them.

“We’ve really stepped up our training, both internally as well as leveraging third-party investors,” Crossett said.

Because the Financial Assessment requires loan originators to collect more documentation from applicants than they were previously required to do, one key emphasis for The Federal Savings Bank has been training LOs to be cautious of bothering prospective borrowers in their collection efforts.

“Asking for and getting all of the documentation we’re going to need upfront from the borrower, right away at one time—borrowers are going to expect that, especially those who have been through the forward mortgage process in the last 10 years,” Crossett said. “If you’re going back and forth with the borrower every couple of days or weeks, that wears them out.”

Working to understand if a HECM is right for a particular borrower, Crosset said, is really about doing a needs assessment on the front end to determine how a reverse mortgage might fit into their financial plans. This includes engaging both the prospective borrowers as well as their trusted advisers in the reverse mortgage conversation.

“We welcome senior’s trusted financial advisers,” Crosset said. “We want them involved from the very beginning to make sure that whatever their clients are thinking about doing with a HECM makes sense with their financial plans.”

This edition of the RMD Report is sponsored by national appraisal management company Landmark Network.

Written by Jason Oliva

Brace Yourself: More HECM Changes on Horizon

If you think the dust has finally settled in the wake of numerous HECM changes, think again. HUD announced their intention to codify recent program changes while also adding new consumer protections to the federally-insured Home Equity Conversion Mortgage program.


Sit down, take a few Tylenol along with a pot of coffee and settle in to read HUD’s proposed rule changes. Perhaps a better approach is a brief summary of the proposed rule changes presented here in the next few minutes.


First, HUD reiterates their first year distribution limit as 60% of the principal limit or the total mandatory obligations plus 10%. What’s new is the forward commitment that the initial 12 month distribution cap is never to be less than 50% of the principal limit. Keep in mind that principal limit factors can be changed outside of the rule making process via a mortgagee letter as market conditions warrant.


Second: H4P changes. HECM for purchase borrowers must complete HECM counseling prior to signing a sales contract or making an earnest money deposit. In addition, HUD proposes to permit sellers to pay fees required to be paid by the seller according to state law or to purchase a home warranty policy on behalf of the buyer.


Third: Maximum origination fees now defined to include expenses incurred in origination, processing and closing the loan. It is unclear at this time if this will impact the offset of costs incurred to originating HECM lenders and lender profitability.


Fourth: All HECM products, features and options must be disclosed to borrower and documented regardless of programs offered by the lender. Expect to see a proposed form once this rule is finalized. This rule is intended to prevent product steering and ensure borrowers are informed of the full range of options within the HECM.


Fifth: Lenders to pay out FHA insurance premiums as collected rather than when the loan is terminated at a later date. This would improve cashflow to the MMI (Mutual Mortage Insurance) fund. This will impact loan servicers who will need to prepare their systems for future disbursements. Also the allowable upfront and ongoing MIP charges must reflect obligations of the Mutual Mortgage Insurance Fund versus the General Insurance Fund. It remains to be seen if this new policy will make rate increases more probable in the future.


Sixth: Including utilities as property charges in financial assessment when failure to pay such charges could result in a lien or trigger a due and payable event.


Seventh: Changes to interest rate caps on adjustable HECM loan products. New rule would cap both annual adjustable increases and decreases to no more than one percentage point per year with a lifetime cap of five percent. In other words a HECM Brace Yourself: More HECM Changes on Horizon The Industry Leader Update by Reverse Focus May 23rd, 2016 ©2016 Reverse Focus, Inc. All Rights Reserved. that began with a five percent note rate would be capped at ten percent. Monthly adjustable HECMs would have no monthly interest rate cap but limit the lifetime rate increase to five percent.


The remaining pages of the 220 page document outline the sections of the HECM policies that are to be updated reflecting the most recent program changes. I’m certain several clarifications will come to light in the coming weeks and months.


Brace Yourself: More HECM Changes on Horizon The Industry Leader Update by Reverse Focus May 23rd, 2016 ©2016 Reverse Focus, Inc. All Rights Reserved.

HECM Changes: Higher Costs, Fewer Choices 

If there’s one word that describes the recently announced proposed rule changes it’s digestion. As many professionals comb over the finer details, one can begin to see a clearer indication of the true impacts on our industry and most importantly, reverse mortgage borrowers.


First a correction. In the last episode, I regret to say that I incorrectly described the continuing payments of monthly insurance premiums as now being required to be sent to FHA monthly. That actually has been an established process for HECM lenders and servicers. What is different is that ongoing monthly premiums must be submitted even after the HECM has reached assignment status with HUD. Premium payments under the proposed rule must continue until the loan ultimately terminates.


Next, lower interest rate caps. There are two primary factors that will reduce the amount of available money to borrowers: home values and interest rates. However, another consequence of lowering adjustable rate HECM interest rate caps is the increase of interest rate margins. Lowering the interest rates caps on the adjustable rate loan would appear to benefit the consumer at first glance, but look again. While the lifetime cap will reduce volatility in FHA’s MMI (Mutual Mortgage Insurance) Fund, slowing the growth of outstanding loan balances reducing crossover risks, it will ultimately cost consumers more.


Ask yourself, would you rather have an adjustable rate loan with a higher margin or a lower cap? If you would rather take your chances benefiting when interest rates trend lower that a lower margin would be your natural choice. Lowering the lifetime cap comes with a substantial cost of a higher margin, a margin that is baked into the loan for the remaining years the borrower is in the home. Lenders will follow with higher margins which in effect lowers the amount of available proceeds. The net effect differs little from a modest principal limit factor or lending ratio reduction. HUD openly admits that the consequential impact of the resulting higher margins will reduce homeowner eligibility while simultaneously reducing risk to the MMI fund.


Another consequence of HUD’s proposed interest rate caps is possibly fewer participants in the HMBS (HECM Mortgage Backed Securities Program), the engine which provides financing liquidity for our industry. Some notable participants in the secondary market foresee higher margins decreasing the attractiveness of the HMBS for market investors. More ominously, Darren Stumberger, executive vice president of Livewell Financial said the realistic expectation is this change eliminates the buyer (HMBS) base, and the sector becomes extinct. If that is the case it would seem that the unintended consequences of new adjustable rate caps would contradict the agency’s desire for more capital market participation.


The reverse mortgage industry’s road is fast approaching where intentions and economic reality intersect. The question is, what will be the end result?


HECM Changes: Higher Costs, Fewer Choices The Industry Leader Update by Reverse Focus May 30th, 2016 ©2016 Reverse Focus, Inc. All Rights Reserved.

Archived Reverse Mortgage Newsletter

Senior Resource Library


A Senior lady who was in need of daily care. She was not sick enough to be in a Hospital, nor a Nursing Home. She wanted to live (and die) at home, but this care was going to cost her about $1300 per month. She did not have this “extra” money laying around for this expense, but she did have a house (with a small $35,000 mortgage). With a Reverse Mortgage, she was able to draw out $1150 per month and pay for her private care and stay home. Oh, yes, the mortgage was paid off also.


She lived for 8 years, drawing the same amount, $1150 each month, and she was a very happy lady. Her son, was also very happy because if she did not use the Reverse Mortgage for this expense, HE, he told me, would have had to reach into his pocket each month to pay for this caregiver for his mother.



Do you know anyone who is becoming part of the “Sandwich Generation”? For those who are thinking of living or experiencing this phenomenon where the adult children have to take care of their own kids as well as their aging parents.

If the elder parents are still living in their own homes, a Reverse Mortgage may be a solution for them, and you.



Many Seniors would love to see their children, grandchildren, and in many cases, great grandchildren once or more times a year. Unfortunately, many families live at great distances and seeing them is hard, especially if the families are large. It costs too much to get a family of 4 or 5 to travel to see the grandparents. Then there is the cost of food, hotel, car rental, and others, so the expense is unjustifiable.


The Seniors themselves do not have the readily available cash to travel either, BUT, with a Reverse Mortgage they can get the money to travel to see their families a lot more often.



The Benefits of as Reverse Mortgage

No Monthly Payments: No repayment of the loan until the customer sells the home, moves out of the home, or passes away.

Security: For both husband and wife, the security of knowing when one passes, no one can take the house away from the remaining spouse. The remaining spouse can live in the home until he/she passes, or moves away too. As long as the taxes and insurance are paid yearly.

Tax free money. Does not affect Social Security income or Medicare benefits. The money received from the equity of the home is not considered income.

Borrowers retain ownership of the property. Property can be refinanced, or sold at any time by the borrowers. Reverse Mortgage money can be used for any purpose the customer wishes.



Can a home be Purchased with a Reverse Mortgage?    Absolutely!

A Senior can purchase a home by putting a modest down payment and taking a Reverse Mortgage for the balance of the purchase price. In many instances, Seniors are selling a home first, then, buying another property, often a smaller home, and they can use some of the funds from the sale for the down payment. This allows them to keep a sizable portion of their selling price to use as savings or as they see fit.

Remember, there is never a monthly payment on a Reverse Mortgage, even when its a purchase!



Long Term Care, how do you pay for it?

As always, education is the key. The fact remains when a Senior, in any income bracket, is considering purchasing Long Term Care insurance, they are always factoring in the monthly cost of those premiums.

With Seniors today currently experiencing the lowest rate of returns in decades on their CD's, savings accounts, and annuities, those monthly premiums can have an adverse affect on their quality of life.

If they currently have a mortgage payment and were offered the option of obtaining a Reverse Mortgage they not only would be able to afford the Long Term Care premiums, but probably have even more disposable monthly income to increase their quality of life. So, allow me to show you how a Reverse Mortgage can benefit your clients as well as your business.



Would you help out your children to buy a home if it did not cost you a monthly fee? I guess we all would, and now you can too!

By taking out a Reverse Mortgage on your home ( no monthly payments due) you can give money to your children which they can use as a larger down payment on their new home, and this will allow them to get a better home, with a lower mortgage payment, and to qualify for their own mortgage much more easily.