Michigan residents may want to learn of a matter raising concern among children whose parents opted for reverse mortgages. While reverse mortgages are a way to provide older homeowners with cash for their retirement, statistics have shown that the children of these homeowners are standing to lose the houses soon after their parents’ passing. The financial institutions that helped their parents to remain in their homes are now threatening foreclosure against the children.
Homeowners who have reached the age of 62 have the opportunity to borrow funds through a reverse mortgage program against their home’s value. The loans are only to be paid when homeowners die or move out of the house. Numerous reports have been received from children of the aged homeowners who were threatened with foreclosure, only days after the passing of their parents. Hundreds of homeowners are desperate to keep the homes after the death of their parents, but are not aware of the federal rules related to reverse mortgages.
Under these rules, the financial institutions holding the mortgages are required to offer survivors the opportunity to pay a settlement amount on the loan. This should be a discounted amount equal to 95 percent of the present market value of the property. However, many mortgage companies have threatened homeowners with foreclosure, only days after their parents died, if the full loan amounts are not immediately settled. Michigan homeowners who have been threatened with foreclosure under similar circumstances may want to take note of these federal rules. Survivors are to be allowed at least 30 days after the due date of the loan, to decide whether they want to keep the house, in which case they have six months to acquire financing.
If this seems intimidating, affected homeowners may wish to seek help relating to their best options in handling the situation and protect their interests. Homeowners who are considering getting a reverse mortgage may want to explore the options of personal bankruptcy protection instead. Under Chapter 7 bankruptcy, all unsecured debts may be discharged and homeowners may protect their survivors from facing foreclosure later.
Source: elpasoinc.com, “Bitter inheritance — Reverse mortgages can push out heirs“, Jessica Silver-Greenberg, May 1, 2014