I received a phone call from a local real estate professional. She called in response to an ad I placed detailing how seniors can buy a home using the reverse mortgage to fund the purchase.
She was sincerely interested in the program, but first decided to vent with an amazing story of pain, agony and just downright horror relating to the reverse mortgage.
Now, in an effort to put the kibosh on the horrible results of a reverse mortgage going viral and thus wrecking my business, I need you to keep reading past the next few paragraphs. You might stop reading and tell your friends about this horror. And they might believe you.
Like most stories that may not be true the story is told second, third or fourth hand. In this case, the agent had a girlfriend, who's friend's father had a reverse mortgage on his home. After his passing the home made it's way into the hands of the FOAFOAR (I'm going to use this acronym for the Friend Of A Friend Of A Real estate professional).
It's a bit of a rareity but the home was valued less than the mortgage amount. It can happen with drastically falling values. Naturally, when her father passed away the mortgage company called the entire note due.
After selling the property, the FOAFOAR still had to come up with an additional $40,000 to repay the bank the difference.
Now, I have doubts about the validity of this story. I have doubts about any story told through a chain of three people, but look.... HUD prohibits mortgage companies from doing what the FOAROAR said it did. The term is "non-recourse". It means a mortgage company cannot come after the borrower or heirs for a deficiency.
In the circumstance of a deficiency or negative equity the borrower or estate conduct the sale of the property as follows....
The mortgage company will require a real estate agent to list and market the property for sale. In the process the realtor will furnish comparable properties so the mortgage company knows the property will be sold at a fair market value. Eventually the home is sold and the lender is repaid the sale price less closing costs.
HUD makes the rules and the lender is entitled only to these proceeds from the sale of the home. If the loan balance exceeds the net proceeds, it's tough cookies for the lender. They have to write it off and go on their merry way.
Enough myths exist about the reverse mortgage to fill a book. I thought this example a good one because it does come up a lot. If deciding whether a reverse mortgage is right for you, make sure you get professional advice, rather than chatting with the guy at the coffee shop who "knows someone who knows someone".
She was sincerely interested in the program, but first decided to vent with an amazing story of pain, agony and just downright horror relating to the reverse mortgage.
Now, in an effort to put the kibosh on the horrible results of a reverse mortgage going viral and thus wrecking my business, I need you to keep reading past the next few paragraphs. You might stop reading and tell your friends about this horror. And they might believe you.
Like most stories that may not be true the story is told second, third or fourth hand. In this case, the agent had a girlfriend, who's friend's father had a reverse mortgage on his home. After his passing the home made it's way into the hands of the FOAFOAR (I'm going to use this acronym for the Friend Of A Friend Of A Real estate professional).
It's a bit of a rareity but the home was valued less than the mortgage amount. It can happen with drastically falling values. Naturally, when her father passed away the mortgage company called the entire note due.
After selling the property, the FOAFOAR still had to come up with an additional $40,000 to repay the bank the difference.
Now, I have doubts about the validity of this story. I have doubts about any story told through a chain of three people, but look.... HUD prohibits mortgage companies from doing what the FOAROAR said it did. The term is "non-recourse". It means a mortgage company cannot come after the borrower or heirs for a deficiency.
In the circumstance of a deficiency or negative equity the borrower or estate conduct the sale of the property as follows....
The mortgage company will require a real estate agent to list and market the property for sale. In the process the realtor will furnish comparable properties so the mortgage company knows the property will be sold at a fair market value. Eventually the home is sold and the lender is repaid the sale price less closing costs.
HUD makes the rules and the lender is entitled only to these proceeds from the sale of the home. If the loan balance exceeds the net proceeds, it's tough cookies for the lender. They have to write it off and go on their merry way.
Enough myths exist about the reverse mortgage to fill a book. I thought this example a good one because it does come up a lot. If deciding whether a reverse mortgage is right for you, make sure you get professional advice, rather than chatting with the guy at the coffee shop who "knows someone who knows someone".
About the Author:
Get 6 more myths revealed plus five monster blunders at the Reverse Mortgage Texas Guide. To learn some great questions to ask try 5 hard hitting questions for the mortgage company before getting your Reverse Mortgage in Texas.
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