So what happens when the last borrower on the reverse loan passes away?
The terms of the loan state the borrower must occupy the property to avoid foreclosure, but if they have died, the loan is now technically considered to be in foreclosure.
However, as long as the Estate notifies Loan Servicing about the situation, they will be given ample time to repay the loan balance.
The Lender does not want to property, in spite of the myth in the general public’s opinion.
Assuming the borrower has family and they are considered to be the “estate”, they have two choices to repay the loan and the Lender will give them up to a year to satisfy repaying it.
List and sell the home. And that is what most family members do. They don’t want the home. They receive any remaining equity, plus a mortgage interest tax deduction for the interest that accrued on the loan ( There are no mortgage payments).
One or all of the family members apply for a traditional mortgage,( have the Title put into their names) and keep the property. They would still receive a mortgage interest tax deduction in the year they repay the loan back to the Lender.
I do have an excellent booklet for family members that was published by the National Reverse Mortgage Lenders Association that explains the process when it is time to satisfy the loan.
If anyone reading this post wishes for a copy of it, please contact me and I will send it to you.
Reverse loans have improved thousands of lives of seniors everywhere. They help with cash flow, paying for caregiving expenses, and eliminate living in fear of running out of money and they have brought comfort and peace of mind for seniors and their families.
They are not defined at predatory lending. They are well regulated and the protection of the senior is of utmost importance in our industry, and countless seniors and their families are relieved of the financial burden and worry about how to age in place.