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Who's estate is responsible for reverse mortgage

Discussion in 'Liens & Encumbrances' started by Just.the.facts.mam, Jul 17, 2019.

  1. Just.the.facts.mam

    Just.the.facts.mam Law Topic Starter New Member

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    Jurisdiction:
    Texas
    Mortgage company loans a married couple an amount of money and determines the maximum amount will be $250,000. The terms of the loan agreement state the borrower(s) can take advances in the form of lump sum, monthly payment, line of credit or a combination so long as the maximum is not exceeded. Furthermore, borrower(s) are considered to be both spouses or surviving spouse should one die. The contract is not changed in any way at the death of one of the borrowers. In turn, the mortgage company files a lien on the community property the couple owns as security for the loan.

    The initial draw on the loan is $50,000. Sometime after the initial draw the husband passes away. The loan agreement is still valid as no provision is made to change anything at the death of one borrower. The mortgage company is obligated to continue making loan advances to the surviving wife. The husband has left his half of their community property to his children from a previous marriage. By state law the wife can remain in the homestead until her death and she chooses to do so, drawing the remaining $200,000 for living expenses over the next several years.

    The question is what has happened to the collateral; the security the mortgage company has against this loan? Half the property is now owned by a party who might not agree to encumber it with additional loans. How could the wife continue to draw on the reverse mortgage?

    At the wife's death the property is sold and a small equity remains but a big argument between the two sets of heirs. The husband's heir says that all the draws on the loan made after the father's death is not his responsibility and he should take all the equity. His justification is that the draws amounted to additional loans and therefore required his approval. The wife's heir says that the loan was one loan and the mortgage lien was established prior to the husbands death and therefore attributed to each estate equally.

    What do the experts say?
     
  2. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    Did you post this same thing here and somewhere else or was it twice on this board?
     
  3. army judge

    army judge Super Moderator

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    If it is in accordance with MANY of these "schemes" offered to senior citizens, the lender (or an investor involved with the lender) owned the home after the mortgage was executed.

    The senior citizen(s) were given a "life estate" which allowed them to occupy the premises until their death(s).

    If the arrangement was drafted in accordance with these "schemes", the surviving spouse was living out her/his "life estate".


    I say if someone THINKS there is some "there=there", someone needs to hire a lawyer to litigate the matter.
     
  4. adjusterjack

    adjusterjack Super Moderator

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    This "expert" says that the reverse mortgage company lawyers have taken this possibility into consideration when creating the contract. After the second death the mortgage company either gets the house or gets the money.

    If the house is sold by heirs to pay off the lender, the escrow company will write the check to the lender for whatever is owed and if there is anything left, the heirs can fight over it and the lender won't care a whit.

    If it's a question of the heirs fighting over money it won't make any difference what kind of mortgage is on the property.
     
  5. Just.the.facts.mam

    Just.the.facts.mam Law Topic Starter New Member

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    If the house is sold by heirs to pay off the lender, the escrow company will write the check to the lender for whatever is owed and if there is anything left, the heirs can fight over it and the lender won't care a whit.


    Let’s say the property sold for $250,000 and there was no equity. The wife’s heirs accept that fact and go on with their lives. The husband’s heirs believe they have $200,000 in equity due to them and want to be paid (the $200,000 advanced after husbands death). They can sue the wife’s heirs who have no assets. Or, they can sue the mortgage company for wrongfully placing a lien on their property in the amount of $200,000 after all, they didn’t agree to it. Would this stand up?
     
  6. adjusterjack

    adjusterjack Super Moderator

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    No. Of course not. Obviously, they can sue whoever they want under whatever basis they want. But they would lose quickly because the mortgage company didn't "wrongfully" put a lien on their property because they didn't own the property when the lien was affixed.

    If you inherit a house from your parents and the house has a mortgage you don't get to say "We'll keep the house but we won't pay the mortgage because we didn't agree to the mortgage." That dog don't hunt and neither does your premise.
     

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