Dealing with Reverse Mortgages after Death
The advent of Reverse Mortgages a number of years ago was a godsend to many “older” Americans who had built up substantial amounts of equity in their properties. Reverse mortgages allows homeowners the ability to “tap into” their equity to obtain monthly funds for living expenses or to refinance a loan that requires a monthly payment and obtain a Reverse Mortgage that has no monthly payments.
When Reverse Mortgages first come on the scene they quickly garnered a bad reputation. There were stories about lenders stealing houses and precluding the now deceased homeowner’s heirs from their inheritance. There are currently commercials running on both TV and radio touting the virtues of Reverse Mortgages and the fact that the equity in the property will still be there for the beneficiaries of the homeowner.
The terms of Reverse Mortgages have improved over the years but they still remain one of the most costly mortgage any homeowner can obtain.
The terms of Reverse Mortgages provide for the payment in full of the outstanding principal balance following the death of the Homeowner. The standard time frame to pay off a Reverse Mortgage is “9” months, but there are many lenders who don’t even allow that much time to pay the Reverse Mortgage back in full prior to initiating a foreclosure proceeding. Our company has seen on many occasions where lenders were not willing to hold off foreclosing since once a Reverse Mortgage goes into default and a foreclosure is initiated an “Insurance Fee” is charged to the Estate under contract signed by the now deceased homeowner that can amount to many thousands of dollars a month.
If a person holds title in their name the laws of California require that the person’s assets must be Probated in a court of law. This can take many years due to required court procedures, but can be extended even longer if there are disagreements between the beneficiaries.
Many times the Reverse Mortgage lender will require that the Reverse Mortgage be paid off in full prior to the completion of the Probate court action. The only option available to the Beneficiaries who don’t have the available funds on hand or the ability to borrow the money from another source is to obtain a Probate Loan. In this situation the Executor or the Administrator of the Probate Estate signs the Probate Loan on behalf of the Probate Estate to pay off in full the Reverse Mortgage.
Since Private Equity financing does not live by the same restrictive lending requirements of the big banks it’s possible to obtain a Probate Loan even if the Reverse Mortgage lender has initiated a foreclosure proceeding. Our company has on many occasions has been able to fund a Probate Loan to pay off a Reverse Mortgage that was already in foreclosure. The Beneficiaries often were very happy since they thought there was just no way to ever get a mortgage and thought their only option was sell the property.
The Probate Loan process is quite simple. If the Executor has received Letters of Testamentary from the Probate Court that contains Full Authority then all that has to be done is:
- “Notice of Proposed Action” this is short Judicial Council form signed and filed by the Executor with the court and served on all required Beneficiaries and parties. This is where the Executor states to the court and to all other Beneficiaries what action is intended to be taken under Executor authority.
- “Waiver of Notice” this is a form that is prepared by the Executor and served on the other Beneficiaries to sign and is further filed with the court providing court proof of each Beneficiary’s concurrent with the proposed Probate Loan. This provides for a waiver of the standard “15” day waiting period provided to all other Beneficiaries to object to actions taken by Executors.
If the Executor was issued Letters of Testamentary that contains Limited Authority or if the Decedent died without a Will and the court appointed an Administrator then under each option a Motion has to be filed with the court petitioning the court to issue a court order acceptable to the title company approving the Probate Loan that was requested by the Executor of the Estate.
There a number of different types of Probate Loans available in the marketplace today, such as those that are not secured by real estate to loans that are secured by real estate. Due to the size of most Reverse Mortgages, a Probate Loan that is secured by real estate would be required since Probate Loans that are unsecured are so much more expensive that it would be foolish to even consider.
Our company is well versed in all the ins and outs of maneuvering investor underwriting requirements and court procedures that are necessary to expedite, fund and close a Probate Real Estate Loan.
Probate Loans are funded by Private Investors or Private Investment Funds and are structured, analyzed and underwritten much like a Traditional Private Equity Loan. The interest rates, terms and costs are on par with any other type of Private Equity Loan. Probate Loans are currently exempt from all the cumbersome regulations, loan disclosure requirements and rescission time requirements under the Dodd-Frank Consumer Lending law that went into effect on January 10, 2014.
We have been called upon on many occasions to step in at the 11th hour and provide a Probate Loan just prior to a scheduled Trustee’s Foreclosure Sale. We’re well versed in the Probate Loan process and have many years of experience providing Probate Loans to Executors or through the Probate Estate’s attorney.
If there is a Probate Estate that might benefit from a Probate Loan then please contact our office at (888) 797-7970 to speak with one of our helpful loan consultants who will be happy to analyze the situation, address any questions you may have and let you know how our company can assist with a Probate Loan.