First of two columns on reverse mortgages. Click here to read the second column.
My late mother's reverse mortgage was a blessing for her. It let her remain in her house until she died. But it was a nightmare for me afterward. I was told her estate had 30 days to repay the loan. I sold the house nine months after she died, but within three months of her death, the mortgage company began threatening foreclosure; and within six months, I had to answer a foreclosure notice in court.
There's plenty of user-friendly information about the upside of reverse mortgage loans, but very little about the stringent repayment schedule — and none of it is user-friendly.
As soon as you move, sell the house or die, the U.S. Department of Housing and Urban Development requires the lender to send you or your heirs a letter that says the loan must be repaid in full or the house sold or the deed made over to the lender — and that if none of these steps is taken within 30 days, foreclosure will be initiated within six months. It's important to respond immediately, says Steve Irwin, executive vice president of the National Reverse Mortgage Lenders Association.
If you show you're actively trying to refinance or sell the house, you can get six months plus two three-month extensions — 12 months in all — to repay the loan.
But if you don't reply quickly, the next letter may be a notice of intent to foreclose. And that notice may arrive within three months, Irwin says — because the lender must refer the case to a foreclosure lawyer 30 days before legal action starts, and must notify you of intent to foreclose 30 days before sending the case to the lawyer.
Next week: Survivors' repayment options.
THE BOTTOM LINE A reverse mortgage is due when the borrower dies.
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