Reverse Mortgage Foreclosures
A Home Equity Conversion Mortgage (HECM), often referred to as a “Reverse Mortgage,” is a special type of home loan from the Federal Housing Administration (FHA).
A Reverse Mortgage allows you to withdraw some of the equity in your home. “Home Equity” is the value of your home minus the amount you owe. The amount of equity you have in your home will change over time as you make payments (increasing your equity), or as the value of your home changes over time due to market forces outside of your control. A HECM is a safe mortgage product that can help seniors (who are 62 years of age or older and own their home) gain access to money for medical or living expenses.
Unlike a traditional mortgage, borrowers do not have to repay it until they no longer own the home or no longer use it as their primary residence. Generally, the proceeds are paid in equal monthly payments to the homeowner, but homeowners can also opt to receive payments as a line of credit. Many seniors use the funds for unexpected medical expenses, to supplement Social Security, or to make home improvements.
WHAT ARE YOUR RIGHTS?
If you, as the homeowner, permanently move out of the home, your Home Equity Conversion Mortgage (HECM) lender may require you to repay the loan because your primary place of residence has changed. This can happen even though you still own the property. If you move out of the home and let someone else live there or you rent it out, the lender can require repayment immediately.
The HECM lender may require that the loan be repaid if you temporarily move out for over 12 consecutive months. A common example of this is when the homeowner moves into a nursing home or rehabilitation center due to health reasons.
The HECM lender may require that the loan be repaid if you sell or transfer ownership of the property.
If the homeowner dies and the property is not the principal residence of at least one surviving borrower or non-borrowing spouse, the HECM lender may be able to require the loan to be repaid. In certain situations, a non-borrowing spouse may be able to stay in the property even after the homeowner has died.
The HECM lender may require that the loan be repaid if you do not meet the contractual requirements of the mortgage, such as:
- Staying current on property taxes;
- Having homeowners’ insurance and additional flood insurance on the property; and
- Maintaining the home in a reasonable, safe condition.
If you do not pay taxes and insurance on the property, the lender may pay those bills on your behalf. But if you do not repay the lender, they may require that the loan be repaid.
The lender may require a set-aside (escrow) account if there is a chance you may not be able to keep up with the tax and insurance bills.
WHAT DO YOU NEED TO DO?
Carefully read the reverse mortgage foreclosure complaint to understand why the lender is foreclosing on your home.
A lender may file a reverse mortgage foreclosure case under the following circumstances:
- Death of the borrower;
- Failure to pay or keep homeowners’ insurance;
- Failure to pay property taxes; or
- Failure to occupy the property for 12 consecutive months.
A reverse mortgage foreclosure summons and complaint may be personally delivered to you by the sheriff or a certified process server. This is called “service of process.”
You must write and file a response with the court, within 20 days of receiving the summons and complaint. If you do not file a response with the court on time, the Home Equity Conversion Mortgage (HECM) lender may automatically win the lawsuit.
In your response, admit or deny each paragraph of the complaint and raise any defenses.
If the HECM lender wins the reverse mortgage foreclosure, a foreclosure sale date will be set. After the sale occurs you will be required to leave the home.
WHAT TO CONSIDER BEFORE TAKING ACTION?
You may stay in your home while the case is pending before the court and until the property has been sold. Do not sign the deed to your property away to anybody who says doing so will help. Please visit our Unfair Lending Practices section for more information about Mortgage Rescue Scams.
Make sure you have sent your completed occupancy form to the Home Equity Conversion Mortgage HECM lender to prove you are still living in the property.
Make sure your homeowners’ insurance has been paid and you have not missed any payments
Make sure you have paid your property taxes. Aside from homestead, you may take advantage of other tax exemptions to reduce your taxes if you are disabled, a veteran, or a senior citizen. If you are struggling financially, you may request to pay your property taxes in installments.
If your spouse was the borrower and is deceased, call the HECM lender as soon as possible to tell them about your intention to stay in the home.
If you are not interested in keeping the property, you may sign a deed to transfer the property to the HECM lender.