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Foreclosure Defense of a Reverse Mortgage and Foreclosure Sale Surplus Funds from a Reverse Mortgage

I have been receiving calls on a regular basis regarding Foreclosure of a Reverse Mortgage. Sometimes these calls are from the homeowner themselves who are wanting to know what they can do to prevent the foreclosure from going through. Sometimes these calls are from the family member (heir) of a deceased homeowner, and they just don’t know how to handle this inherited property. What is a reverse mortgage, also called a “home equity conversion mortgage”? I will try to break this down the best way possible.

Florida Statute 697.202 defines a Home Equity Conversion Mortgage as “a reverse mortgage loan made to an elderly homeowner, which mortgage loan is secured by a lien on real property.” It also defines an “elderly homeowner” as someone who is 70 years of age or older. If the home is jointly owned, then both homeowners are deemed to be “elderly” if at least one of the homeowners is 70 years of age or older. Additionally, the general rule for a reverse mortgage to stay in place is that 1) the homeowner needs to live in the property; 2) the property must be kept in good repair; and 3) the property taxes and homeowner’s insurance need to be maintained by the homeowner. If any of these are not met, the reverse mortgage lender will foreclose.

If you are the homeowner and you have not maintained the property, moved to an assisted living facility or with family, or not paid the property taxes or insurance, the lender will file for foreclosure. The only way you can stop the foreclosure from proceeding to a judicial sale is to provide proof to the lender that you have fixed any of the issues stated above. Then you will have to pay the court costs and attorney’s fees incurred by the lender in filing the foreclosure case. As long as you can do these things, the lender will dismiss the foreclosure case.

If you are the family member or heir of a deceased party who had a reverse mortgage, you have a few options available to you as well. You can keep the property provided you have acquired ownership of the property by deed or probate, and you must pay off the subject reverse mortgage. You can also sell the property yourself provided you have acquired ownership of the property by deed or probate. And lastly, you can do nothing if you do not wish to keep the property and you may be entitled to Florida Foreclosure Surplus Funds (if any) from the judicial sale of the property after the foreclosure case is completed.

First, if you want to keep the property or sell the property, you must first obtain ownership. If your deceased relative had a life estate deed with you as the Remainder, then the property automatically transfers to your name at the time of his/her death. Additionally, if the deceased relative simply quitclaimed the property to you while they were alive, you will have ownership of the property. If neither of these were done prior to their death, you will need to file for Probate in the County the property is located in. A probate is necessary whether there is a Will or not. A Will does not automatically transfer ownership and must be probated to be valid in the state of Florida.

Once you gain ownership of the property, you have the option to either sell the property or to pay off the property. Selling is relatively simple, and you can speak to a realtor and sell the property for what is owed to the reverse mortgage lender or for a profit as long as the property has equity. If you want to keep the property, you have the option to pay off the reverse mortgage for either the full balance of the loan or 95% of the home’s appraised value, whichever is less. This option is granted on all reverse mortgages and are backed by HUD (Department of Housing and Urban Development). If the 95% of the appraised value is the lesser, the lender will be reimbursed by HUD for the remaining amount.

Lastly, if you choose to do nothing, you can simply sit back and wait for the foreclosure sale of the property to complete. As long as you are not a guarantor to the note or mortgage, you cannot be held liable for any deficiency from the foreclosure sale. However, as an heir you could be entitled to the Florida Foreclosure Surplus Funds (if any) from the foreclosure sale of the property. According to Florida Statute 45.033(2)(b), “An involuntary transfer or assignment may be as a result of inheritance.” This means that you may not need to do a probate in order to receive the surplus funds because you are an heir.

Whichever of the above scenarios you need help with regarding a Foreclosure of a Reverse Mortgage, please give me a call for a free consultation. If you are the owner of the property and need help with defending the foreclosure case, I can let you know what is needed to get the case dismissed. If you are a relative of a deceased homeowner and don’t know what to do about the foreclosure case, I can help you to determine the best action to take. You may need to do a probate, you may not. You may be able to keep the property or sell it. You may also be entitled to any remaining Florida Foreclosure Surplus Funds even if you don’t defend the case at all. I handle Foreclosure Defense, Foreclosure Sale Surplus Funds and Tax Deed Sale Surplus Funds in every County in the State of Florida. And in the case of Surplus Funds, I don’t get paid unless you do.

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