When Owner Occupant Dies and The Home Has a Reverse Mortgage

This is a situation many heirs are beginning to deal with, and it's important to know what can happen after the death of a loved one who had such a mortgage.

Simply put, an heir has options: 1) He or she can pay back the loan; 2) sell the home to pay back the current loan amount, and keep the remaining proceeds; 3) deed the home back to the lender; 4) let the lender foreclose.

But really, the last two options should only be options when there is no equity left in the home, because why would an heir want to walk away from a potential sale and receive the remaining equity?  The first option may work for some people, if they have the ability to refinance with their own mortgage, thereby paying off the reverse mortgage.  But if an heir doesn't have the desire or financial ability to keep the home with a new loan, the remaining option is to sell the home.

Most original loan documents give a year to dispose of the property, but in practice, HUD will find out when the borrower passes away, and a due-and-payable notice will go out to the heirs giving them an opportunity to decide what to do. An appraisal may be required within 30 days, and a longer time period may be allowed for the heir to decide whether they're selling or staying.
It's a huge mistake to ignore this letter, because if 6 months passes by after the issuance of that letter, the home may be foreclosed on.  In California, from the initial filing of the foreclosure, there is another 121 days after which time the foreclosure is complete, and the heirs have now lost the home.

So the desirable situation is for the heir to keep in touch with the lender, answer their questions and get the home prepared for sale.  The lender really doesn't want to file foreclosure, they will only take the home back when they have no other choice, it's a cost to the lender, and they are not in the business of acquiring homes. So the lender will probably be very willing to work with an heir who plans on listing the home and getting it sold. That also sounds simple, but preparing the home for sale in order to get the best price may require pre-marketing work because an aged occupant may not have kept up maintainence, repairs, or upgrades for many years.  Be prepared for this, but it will be worth it for the heir if they stand to recoup a sizeable amount from the sale, i.e., what if the last statement balance on the mortgage was around $450,000, but the house is worth $750,000! A Realtor's job in this instance is to guide you through the preparation and actual sale of the home. See more information here.

If you need a Realtor to help you determine the value of a home with a reverse mortgage, please contact me right away, because time is of the essence! I have been helping clients with residential real estate since 1994.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

Sales in Los Angeles County: Prices Still Continuing Upward in 2017

The median price of an existing, single-family detached Los Angeles County home rose in April 2017 to $595,000 from $570,000 in March. The March 2016 median price was $542,000.  All data comes from CoreLogic. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values.

The median price of an existing, single-family detached Los Angeles County home rose in April 2017 to $595,000.

But while prices are going up in the County as a whole, sales volume has decreased in the Spring:
the number of single family homes sold in April 2017 was 4,524; in March, 2017 it was 6,051; in March 2016 homes sold was 6,329.  This is a lower but similar sales volume compared to the same time last year.

The 2017 sales volume for Orange County is a similar picture, but with much lower sales numbers: total SFR sales thus far are 1772 and 2469 for April and March, respectively, with median price at $745,000 for both months.

Less inventory means much more competition for buyers in Long Beach.  In the past month, the lower price range under $500,000 sells on average in 25 days on average (overbidding and multiple offers is common), while properties in the $1,000,000-plus range are on the market for 62 days on average.

While housing prices continue upward, housing affordability in California is increasingly a topic of concern.  Another indication of housing prices is that investors are buying fewer single family and multi-family properties.  California Association of Realtors 2016 California Investor Survey found 10 percent of real estate investors purchased more of the other types of properties, such as commercial, land, and mobile homes, in the past year compared to previous years.

Lack of inventory continues, especially in Southern California, and is still an issue for sellers who want to move on--but for those moving out of the area, or for those who have all cash for a purchase, the ability to move on may be much easier, and would bring more housing inventory onto the local market for sale. From that standpoint, it's a good time to sell while interest rates are still low. 

Please contact me for a customized report on home value for your property! And while most people are little uncertain about them, reverse mortgages as a new purchase can be a good purchase tool for the right buyer 62 and over.
 (See the 2016 post on this:  https://longbeachrealestate.blogspot.com/2016/04/sales-volume-in-los-angeles-county-is.html)

The Technicalities of Reverse Mortgages: Are You a Non-Borrower Spouse?

Could the lady in this photo be someone in your family?

 Per a HUD (the overseer for reverse mortgages) statement dated September 4, 2013, reverse mortgage borrowers are advised that the both the borrower and his/her spouse should be counseled:  "One main concern for the non-borrower spouse is when the borrowing spouse passes away and the loan becomes due and payable. More often than not, the surviving nonborrower spouse, who is not on the deed, may not be able to pay the balance due or meet the criteria to qualify for a HECM of their own on the property in order to remain in the property. During counseling, all parties must be made aware that the HECM cannot be assumed by the non-borrower spouse." 

A non-borrower spouse may not have protection, and may be forced into a foreclosure situation if he or she is not able to buy out the reverse mortgage.  In a situation involving a 92-year-old widow in Arizona, this article outlines the action ultimately taken because of intervention by the Consumer Financial Protection Bureau (CFPB) when appealed to by the woman's son, where Bank of America bought the reverse mortgage after the widow claimed she was unaware that her name was not put on the loan, and the Bank stopped its foreclosure action and allowed her to continue living in her home. 

This Arizona story is not an everyday scenario, however, so the counseling described above is designed to make the parties aware of the position a non-borrower surviving spouse could be put in after a spouse's death or permanent placement in a facility, because, according to the HUD guidelines, the loan is then due and payable.  And how soon is "due and payable"?  Per All Reverse Mortgage Company's site: if a borrower passes away or
"if a borrower is forced to go to a hospital for more than 12 consecutive months and there is not still one original borrower remaining in the home (not a family member, but a borrower who is on the loan), then the loan shall become Due and Payable and must be paid in full at that time," also, a borrower is urged to contact the servicer if he/she plans to be away for an "extended vacation".  This is important because a reverse mortgage requires the borrower(s) to reside in the property as their principal residence, however, that doesn't mean people don't take trips, so communication is important. 

For borrowers interested in future application for a reverse mortgage, as of March 2, 2015, lenders will be required to review their:

• Credit reports.
• Payment histories on property taxes, homeowners association fees and hazard insurance premiums.
• Income from full-time and part-time employment, Social Security, pension funds, regular draws on IRAs and 401(k) accounts, plus any earnings on investments.
• Recurring household debt obligations.

FHA wants lenders to come up with a cash flow and residual income analysis.

 For further help on this topic, please contact me directly and I will be happy to refer you to a qualified reverse mortgage lender. 

One technicality tucked away in FHA’s regulations can snag owners whose spouse dies after taking out the reverse mortgage. If the surviving spouse’s name does not appear on the mortgage documents, the outstanding debt balance becomes due and payable. If the surviving spouse can’t afford to buy the house to make the payoff, the property may be put up for foreclosure sale. - See more at: http://therealdeal.com/blog/2013/03/01/232102/#sthash.Oty7WfpJ.dpuf