Be Careful of the Reverse Mortgage Info Messenger
I had the pleasure of speaking to a real estate agent yesterday. She wanted to discuss the reverse mortgage, in particular how it can be used as purchase money after January 1.
She expressed interest but not before going into a long, horrible and sad story of a friend of a friend who had an unbelievably bad experience with a reverse mortgage. I was intrigued from the get go.
In efforts to stop the rampant spread of misinformation, falsehoods, mythology and every other "ology" you must read this entire article. You can't read the next four or five paragraphs, stop, and tell everyone you know the painful effects of the reverse mortgage.
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.
To repay the reverse mortgage lender the FOAROAR sold the property and had to come out of saving an addition 40 thousand dollars to cover the deficiency.
Did this happen? I seriously doubt it. The reason is reverse mortgages are known as non-recourse loans. This means in the circumstance of the FOAFOAR the mortgage company cannot come after the heirs for the difference.
In the circumstance of a deficiency or negative equity the borrower or estate conduct the sale of the property as follows....
The home will be sold at a fair market value. The lender knows this because it requires the borrower or family to hire a licensed realtor to list and sell the home. When the house finally transfers to the new owner, the lender is repaid the price minus closing costs to sell the home.
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 expressed interest but not before going into a long, horrible and sad story of a friend of a friend who had an unbelievably bad experience with a reverse mortgage. I was intrigued from the get go.
In efforts to stop the rampant spread of misinformation, falsehoods, mythology and every other "ology" you must read this entire article. You can't read the next four or five paragraphs, stop, and tell everyone you know the painful effects of the reverse mortgage.
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.
To repay the reverse mortgage lender the FOAROAR sold the property and had to come out of saving an addition 40 thousand dollars to cover the deficiency.
Did this happen? I seriously doubt it. The reason is reverse mortgages are known as non-recourse loans. This means in the circumstance of the FOAFOAR the mortgage company cannot come after the heirs for the difference.
In the circumstance of a deficiency or negative equity the borrower or estate conduct the sale of the property as follows....
The home will be sold at a fair market value. The lender knows this because it requires the borrower or family to hire a licensed realtor to list and sell the home. When the house finally transfers to the new owner, the lender is repaid the price minus closing costs to sell the home.
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:
For an indepth examination of the Texas reverse mortgage click here.. For pure reverse mortgage education tryKnowledge Center -Texas Reverse Mortgage
posted by Debt Consolidation Loan at
10:30 AM
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