Money.com: Describing the End of the Reverse Mortgage Process

The Money.com personal finance website offers basic product information and a series of frequently asked questions about reverse mortgages, but also aims to provide information to potential borrowers about what happens at the end of the mortgage. a reverse mortgage when a borrower leaves the house.

“Inheriting a home with a reverse mortgage can be difficult,” the column read. “The heirs must decide whether to pay off the reverse mortgage out of pocket (or with another loan) and keep the property or sell the house and use the proceeds to pay off the balance.”

It then describes the nature of the non-recourse feature of a home equity conversion mortgage (HECM) as sponsored by the Federal Housing Administration, and when FHA insurance would kick in if the loan went underwater. .

The column also outlines how heirs generally have 30 days to repay the loan balance after the borrower has left the home, and the extension that can be requested for up to one year in the case of a HECM. It also describes how to “get out” of a reverse mortgage.

“There are many ways out of a reverse mortgage. If you are within three days of closing, you can exercise your rescission right and cancel your loan,” the column explains. “You will need to do this in writing, but once received your lender has 20 days to refund your charges and fees.”

Withdrawing from the loan after this period allows the borrower to repay the loan balance as they see fit, but the fees are not refunded. Borrowers can also choose to refinance the loan from a HECM into a traditional mortgage, assuming they are aware of the need to make regular mortgage payments once again.

Because the reverse mortgage industry is dedicated to serving the protected class of older people, bad actors may seek to illegitimately portray themselves as representatives of a reverse mortgage company in order to take advantage of older people and their finances, explains the column.

“Reverse mortgages have been used to scam homeowners in the past. In many cases, those targeted are not informed that property taxes, insurance and home repairs must continue to be paid, causing them to default on the loan – and resulting in an easy payday for the unethical lender,” the column read.

Scammers also typically aim to pressure older people into using their loan proceeds for some sort of illegitimate investment opportunity, the column explains. The practices of scammers posing as reverse mortgage professionals have been the subject of numerous advisories and warnings to consumers by the federal government.

Earlier this year, the Office of Inspector General (OIG) of the US Department of Housing and Urban Development (HUD) released a Fraud Bulletin outlining common tactics used by these criminals.

“Typically, HECM borrowers don’t realize it was a scam until they hand over the funds and the investment, service or product is never delivered,” the report says. newsletter.

Read it column on Money.com.

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