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Reverse Mortgage Foreclosure Issues

Mortgage-Foreclosure-IssuesReverse mortgages are made to homeowners aged 62 or older. They allow the homeowners to access the equity in their home to pay their bills while allowing them to continue to live in their homes. In situations involving reverse mortgages the homeowner no longer makes monthly payments. The amount owed to the financial institution gets charged against the homeowner’s home equity and these loans are usually insured by the Federal Housing Administration. The reverse mortgage is not due and payable until the homeowner’s death.

Taxes and Insurance on the Home

Although the homeowner does not have to make mortgage payments, the homeowner is usually responsible for paying the property taxes, school taxes and maintaining their homeowner’s insurance. The failure by homeowners to pay these expenses can cause the financial institution that provided the reverse mortgage to bring a foreclosure lawsuit based on the homeowner’s non-compliance with the conditions involved in the mortgage.

Reverse Mortgage Foreclosure Default

New legislation requires reverse mortgage defaults now have to receive a 90 day preforeclosure notice under the Real Property Actions and Proceedings Law Section 1304. The amendment to this law causes financial institutions to participate in mandatory settlement conferences with regard to working out alternatives to foreclosing on the home regarding reverse mortgages.

The new reverse mortgage law indicates a list of the items that can trigger a reverse mortgage foreclosure. These include:

  • failure to include a required certificate of occupancy on an annual basis
  • death of the named borrower
  • failure to pay real property taxes
  • failure to maintain homeowner’s insurance
  • failure to pay water bills and sewer bills
  • failure to make required repairs
  • failure to occupy the home as a principal place of residence

Conclusion

This new legislation provides homeowners who have reverse mortgages many of the same protections homeowners who have conventional mortgages have. In addition, it provides them with notice as to any of the possible items which could cause their home to go into foreclosure.

schlissel-headshotElliot S. Schlissel is a foreclosure lawyer representing homeowners throughout the Metropolitan New York area for more than 35 years. He can be reached at 800-344-6431 or e-mailed at Elliot@sdnylaw.com.

Reverse Mortgages: Should You Consider One?

Picture of a home

Reverse mortgages are usually taken out by seniors to unlock the equity in their homes. However, there are pros and cons as to whether a reverse mortgage is the appropriate thing to do.

Facts About Reverse Mortgages

Reverse mortgages are mortgage loans taken out by individuals at least 62 years of age. The theory behind a reverse mortgage is that the equity in the home will support the reverse mortgage and the mortgage will be repaid when the homeowners die. Reverse mortgages do not have to be paid as long as one of the borrowers is still living in the home. The funds received from the reverse mortgage can be taken in a lump sum, as a line of credit or in monthly payments.

Reverse Mortgages vs. Traditional Mortgages

In a traditional mortgage the homeowner takes out a mortgage and then makes monthly payments until the mortgage is paid in full. The monthly payment represents both the payment of principal and interest due and owing on the principal. With regard to reverse mortgages, the homeowners do not have to repay the reverse mortgage on a monthly basis. It is usually paid after both of the homeowners die or both of the homeowners are no longer living in the home.

Benefits of a Reverse Mortgage

One of the most significant benefits of a reverse mortgage is the home will not be foreclosed upon and the homeowners will not be forced out of their home because they can’t make monthly payments. Reverse mortgages give homeowners peace of mind knowing they no longer have a monthly payment they need to make to the bank.

Some Disadvantages of Reverse Mortgages

Banks are usually very conservative with regard to how much money they will provide a homeowner with pursuant to a reverse mortgage. When the homeowners die, the homeowners’ heirs will either have to have the home sold to pay back the reverse mortgage or they will have to come up with the balance due on the reverse mortgage. Reverse mortgages generally have higher interest rates than traditional mortgages.

Conclusion

If you are considering a reverse mortgage you should first shop around to several different financial institutions. You should compare the interest rates offered on the reverse mortgage from each of these institutions. If you are not sure as to whether a reverse mortgage is the appropriate avenue for you to pursue, you can consult with an elder law attorney to help you make this decision.Attorney Elliot Schlissel

Elliot S. Schlissel, Esq. is a member of the National Academy of Elder Law Attorneys representing seniors throughout the Metropolitan New York area.

VIDEO: Reverse Mortgage Foreclosures

Reverse Mortgages: What Are They and How Do They Work?

reverse mortgage

A reverse mortgage is a mortgage loan given to senior citizens that seek to utilize the equity in the home to support themselves in their old age. Generally speaking, the loan does not have to be repaid until the last surviving spouse either dies or permanently moves from the home. In the event of the death of the last of the husband and wife to die the estate of the second to die has approximately 6 months to repay the entire balance of the reverse mortgage or take action to sell the home for the purpose of paying off the reverse mortgage. After the reverse mortgage is paid off the rest of the equity derived from the sale of the home becomes an asset of the estate. Should the home be underwater, be worth less than the reverse mortgage, the estate and either the executor or administrator of the estate will have no personal liability with regard to paying off the portion of the reverse mortgage not covered by the sale of the home.

Who Is Entitled to Obtain a Reverse Mortgage?

Eligibility to obtain a reverse mortgage requires all of the homeowners be a minimum of 62 years of age. In addition, all mortgages on the home must be paid off prior to obtaining the reverse mortgage or at the time of obtaining the reverse mortgage. The home must be the primary residence of the individuals seeking to obtain the reverse mortgage. In addition, the homeowners must continue to pay homeowners’ insurance and property taxes of every type and nature that accrue on the home. The taxes can be property taxes, school taxes, town taxes and village taxes.

Loan Amounts

The amount the homeowners can obtain from the reverse mortgage depends on four (4) specific issues: the interest rate at the time of the reverse mortgage loan, the appraised value of the home, the age of the parties seeking to take the loan and the current government imposed lending limits at the time of the loan application.

How Reverse Mortgage Payments are Made

Attorney Elliot Schlissel

Reverse mortgage payments can be made on a monthly basis for as long as the homeowner lives in the home, for a fixed period of months or the homeowners can take a lump sum out all at once. In addition, the reverse mortgage can create a line of credit the homeowners can access at any time. It is not recommended that the homeowners take the lump sum of all the funds from the reverse mortgage. In these cases the homeowners may not be able down the road to pay at one time the taxes on the home. The non-payment of the property taxes on the home or failure to pay the homeowners insurance is a basis for the financial institution bringing a reverse mortgage foreclosure lawsuit.

Reverse Mortgage Foreclosures

A briefcase full of money

Many seniors in New York are facing reverse mortgage foreclosures. These seniors often are at a stage in their life where they are on fixed incomes. If they lose their homes they may end up living in the street!

Unpaid Property Taxes

The failure of seniors to pay their property taxes has been the reason for the recent increase on reverse mortgage foreclosure proceedings. In many cases the homeowner does not know how much is owed in property taxes and homeowners insurance payments. Many of these foreclosures are triggered by outstanding financial obligations by the homeowners of only $10,000.00.

There are many consumer oriented protection statutes which protect homeowners in regular mortgage foreclosures but do not apply to reverse mortgage foreclosures. There are no mandatory foreclosure settlement conferences with regard to reverse mortgages. In addition there is no 90 day notice requirements prior to the initiation of the reverse mortgage foreclosure, as would be required in a traditional bank foreclosure.

Lump Sum Reverse Mortgage Payments

Many of the problems faced by seniors result from their taking lump sum payments on their reverse mortgage and thereafter spending all of the money. A better route is for seniors to receive steady payments over a period of time from the funds from the reverse mortgage. This will enable them to pay for the homeowners insurance on their home and the taxes on their property.

In 2015 New rules went in to effect designed to ensure seniors have the financial ability to repay the tax expenses on their homes.

Conclusion

Under certain circumstances a reverse mortgage is a reasonable option for a senior to take. It allows the senior to utilize the equity in his/her home to support themselves. However it is usually a bad idea for the senior to take all of the funds out of the reverse mortgage in lump sum. Reverse mortgages work properly when the seniors receive periodic payments that allows them to live with dignity and to pay the taxes and homeowners insurance on their homes.

NY Foreclosure Defense Attorney Elliot Schlissel

Elliot S. Schlissel and his associates are foreclosure lawyers representing homeowners throughout the Metropolitan New York area.

Foreclosure Defense in Valley Stream, Lynbrook, Baldwin, Malverne, Freeport, Oceanside, Long Beach, Elmont, Lakeview, West Hempstead, Hempstead, Merrick and Bellmore, New York

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We represent individuals throughout the New York Metropolitan area with divorce and child custody, personal injury, car accident, wrongful death, estate administration, nursing home and medicaid issues

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