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Reverse Mortgages/Repayment of reverse mortgage

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Question
Our family is faced now with repaying the reverse mortgage on our mother's home.  If we do not want to refinance the house, or let the lender foreclose, or want to use our own funds to pay off the mortgage, then we have to sell the house.  The house is now worth less than what is owed.  We have read two different explanations of what would constitute sufficient payment by us.  One explanation is that we would give the lender only whatever we could sell the house for, which might be far below the appraised value. The other explanation is that we would owe the lender 95% of the current appraised value of the house.

Which of these explanations is the correct one?

If it is the second one, are we responsible for making up the difference if the house sells for less than 95% of the current appraised amount?

Answer
Frank,

I wish I could give you a definitive answer, but there are two issues that stand in the way.

1.  The specific answer to your question lies in the particular language in the reverse mortgage documents for the transaction involving your mother's house.

2.  I'm unable to give you a legal opinion on Illinois law -- you'll have to consult with a licensed attorney there (or in the State where your mother's house is located, if it's not Illinois).

In general, you can't be held liable for debts of the estate, so it likely becomes an issue for the attorney involved in the probate of the estate.

I'd suggest that you (or the Executor of the estate) confer with the probate attorney, who should be able to provide you with the specific answer, and advise on the best course of action in the context of the estate and the heirs.

I hope that helps -- and let me extend condolences on the loss of your mom.  

Reverse Mortgages

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Yan Ross

Expertise

Reverse Mortgages are a financial tool available to homeowners of the age of 62 or older. They are not for everyone. Mr. Ross provides responses to questions regarding eligibility, terms, consumer protections, financial requirements, and all other aspects of HUD-sponsored and other private program Reverse Mortgages.

Experience

In addition to my legal and general business experience, I have trained with John Bennett, of Home Lending Specialists, the leading and most experienced originator of reverse mortgages in the country. I have mastered both academic and practical aspects of the reverse mortgage business, with special emphasis on consumer protections.

Education/Credentials
Author, Certified Home Equity Conversion Mortgage Specialist (CHECMS) course, Institute of Consumer Financial Education (ICFE) Bachelor of Arts, Princeton University -- Juris Doctor, Yale Law School -- Accredited Educator in numerous professional disciplines

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