Is your re­verse mort­gage due?


I have pre­vi­ously dis­cussed the ba­sics of a re­verse mort­gage and de­ter­mined that it al­lows bor­row­ers age 62 or over to ac­cess a por­tion of their eq­uity, and elim­i­nate prin­ci­pal and in­ter­est pay­ments for the rest of their lives, or un­til they move out of the home per­ma­nently. We’ve also learned that the money which may have to be drawn is tax-free, and the meth­ods for re­ceiv­ing pay­ments are very flex­i­ble. A re­verse mort­gage (RM) may in­crease your monthly cash flow by al­low­ing you to ac­cess your home’s eq­uity with­out sell­ing your home. You also re­main on ti­tle and your heirs will in­herit your home and will not be stuck with your debt af­ter you pass away, be­cause of a non-re­course clause pro­tect­ing the par­ties to the mort­gage, in­clud­ing the heirs.

You may also use an RM to “pur­chase a home,” so let’s talk about what hap­pens when the mort­gage be­comes due. Like any mort­gage, it will even­tu­ally be­come due and payable. The ques­tion be­comes, when­will you pass away or move out of the home per­ma­nently? In the­world of the home-eq­uity con­ver­sion mort­gage, this is re­ferred to as a “ma­tu­rity event.”

You’re able to pay off your RM at any time, or when you reach a ma­tu­rity event; this oc­curs, and the loan has to be re­paid, if you fail to main­tain the home; fail to pay your prop­erty taxes, home­own­ers in­surance, or HOA fees and there are no more op­tions to bring the loan cur­rent; or­when you sell your home, con­vey your ti­tle to an­other party, or you pass away or move out­side of the prin­ci­pal res­i­dence for a pe­riod in ex­cess of 12 months due to phys­i­cal or men­tal ill­ness. No fur­ther funds will be dis­bursed af­ter a ma­tu­rity event oc­curs.

I al­ways rec­om­mend com­mu­ni­cat­ing with your loan ser­vicer. He or she is there to an­swer ques­tions and clar­ify the path you need to take in re­gard to your RM, and how­to­move through the end of the loan process. Keep the phone num­ber and/or email ad­dress to your loan ser­vicer handy. The con­tact in­for­ma­tion will be in the doc­u­ments you re­ceived at your ti­tle-com­pany clos­ing of your re­verse mort­gage.

It’s im­por­tant to note that loan ser­vicers au­dit death records, and many of the ma­tu­rity event dead­lines are based on the bor­rower’s date of pass­ing away, not the date the loan ser­vicer is no­ti­fied. Your ser­vicer will mail a “Due and Payable” let­ter, and it will give the specifics on bal­ance due, op­tions for pay­ing back the mort­gage, days to re­spond, and op­tions to avoid fore­clo­sure.

If you hap­pen to pass away with­out heirs, the loan ser­vicer will need to take le­gal own­er­ship to dis­pose of the prop­erty, and if there are heirs in­volved, it’s im­por­tant that the heirs meet the re­quired dead­lines and stay in con­tact with the loan ser­vicer.

The moral of this story is Stay in Touch! And please con­tact your loan ser­vicer for more in­for­ma­tion on this topic.

Dirk Gray is a re­verse mort­gage spe­cial­ist with Frost Mort­gage, an ac­cred­ited in­struc­tor for the New Mex­ico Real Es­tate Com­mis­sion. Opin­ions ex­pressed are solely my own, and do not ex­press the views of my em­ployer, the Fi­nan­cial In­sti­tu­tions Divi­sion of the N.M. Reg­u­la­tion & Li­cens­ing De­part­ment. I can be reached at 505-9301953, dirk_gray@frost­mort­, and YourNewMex­i­coRe­v­erseMort­

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