Do you belong to the group, who has HUD reverse mortgages, but whos name is not in the title nor who has not signed the agreement? What if your spouse will pass away and you have to pay the whole outstanding balance?
It is generally known, that the HUD reverse mortgages claim in their terms, that the borrower has never to use his or her other assets to pay back the reverse loan. That the home selling price and the reverse mortgage insurance will cover the whole loan amount, always.
However, there are three widows of the borrowers, who were forced to do this. With the heavily decreased home prices this is a tough job. So to prevent the foreclosure these three widows decided to sue HUD, The Department Of Housing And Urban Development. What happened?
These widows claim that HUD changed in 2008 the old rule, which said that the borrower should never pay more than the value of the home and if this does not cover the whole amount, the missing part will be paid from the obligatory mortgage insurance. Sounds clear.
But according to the new HUD practice, they claim that the spouse has to pay the whole outstanding loan balance, if he or she wants to keep the property. This is tough, if the home price is lower than the total amount of the loan capital, accrued interests and all the accrued costs.
1. The Names In The Title And Loan Agreement Matter.
The system is very clear. The borrowers are those seniors, who have signed the agreements of the HUD reverse mortgages. When the last borrower will pass away, will move permanently to another location or will sell the property, the home will be sold and the selling price will be used to pay back all the money, which is owed to the lender. The remaining part belongs to the borrower or to the heirs. If the heirs want to keep the property, they have to pay away the owed amounts to the lender.
2. The Widows Wanted To Keep The Home.
The widows in question wanted to keep the homes, which was impossible because the home prices were decreased below the amount owed and they were unable to get the funding to finance the deals. The American Association Of Retired Persons Foundation claims that the HUD rule change was made in secret and they also said, that the HECM program follows the consumer protection practice, where the term homeowner includes the spouse.
3. If A New Buyer Will Buy The Property, It Will Be Sold At The Market Price.
Think about this. If a widow spouse wants to buy the property, he has to pay all the owed amounts to the lender, which will exceed the home present value. But if the outsider will buy the property when it will be sold, he or she will get it at a lower price. This cannot be fair according to The American Association Of Retired Persons .
4. In July 2011 The Court Made A Decision.
Actually HUD won this case, which is natural, but not so human. However, if we remember the basic reverse mortgage agreement, the decision followed the principles. The problem was, how to keep the old homes with a current market price. The answer is simple. The spouses could have bought the homes, when the lenders were selling them. They could have done this by using the reverse mortgages, because there were a lot of equity left. Maybe The American Association Of Retired Persons just tested the system and tried to change it to become more consumer friendly.
Juhani Tontti, B.Sc., Has Written A Lot About The Features Of The HUD Reverse Mortgages And Other Topics Concerning The Reverse Mortgages To Help Seniors To Get The Full Picture. Visit: Reverse Mortgage
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