Friday, October 24, 2014

Reverse Mortgage foreclosures

This note is about reverse mortgage foreclosures.
 
A reverse mortgage is a mortgage where the bank pays the owner of a property rather than the other way around.  Anybody over the age of 62 may qualify for a reverse mortgage, and may use it either to purchase a new property or may use it as a refinance to cash in equity on the property.
 
A reverse mortgage does not have to be repaid until after the last occupant leaves the property to move on to a better place.  At that point the heirs may either pay off the mortgage and take possession or they walk away and the bank repossesses the property as a foreclosure.
 
Now you might be wondering how this effects you as the buyer of a property.  Well here's the thing.
 
If you see the magic phrase sold under 24 CFR206.27 then you might also find these words in the small print..
 
i) this applies when the mortgage is a reverse
mortgage insured by HUD, (ii) it describes the process for what
happens when the mortgage becomes due, either because of death or
another reason, and (iii) much of the rule is irrelevant to buyers. But
item (g) at the end of the rule is relevant to buyers: it means that (a)
the lender that now owns the house isn't going to make any repairs
unless they are required by local law or HUD standards for HUDinsured
properties, and (b) the property cannot be sold to a buyer that
has a family, ownership, employment or other relationship with the
lender. (Seller can't accept offers below list price)
 
 
In other words nothing, especially the price, is negotiable on this one, so don't ask.
 
Now if you are over 62 (the more over the better) and a little short of cash, you should definitely consider buying with a reverse mortgage.  They give you the some of the cash and you don't have to make any payments.

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