Beware of Reverse Mortgages

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My parents had a Reverse Mortgage.  When they moved out in 2014 the house was returned to the Department of Housing and Urban Development through a process called a Deed in Lieu of Foreclosure.  I notified the Home Owners Association on which my Father had served for many years.

HUD contracted with a private “consulting” company to handle the mortgage and deed.  That company hired a “title” company to get the deed signed and recorded.  All my correspondence with HUD, the contractors and the HOA had my name, email and phone number.  I wasn’t hard to find.  In 2016, I finally received the Deed in Lieu of Foreclosure which I promptly signed and sent back.

Fast forward to 2019.  My parent’s next door neighbor joined the Board and found out that Mom and Dad’s estate owes $20,000 in back HOA dues inclusive of interest and fees.  How could this have happened?  I send them my copy of the Deed in Lieu of Foreclosure but they insist that the deed is still in my parents name.  I look it up, they’re correct!!

I call the “Mortgager” and found it impossible to get through to them.  I was sent to a call center who wanted my name and address in order to send me a $100 Visa Gift Card.  (Really!?!)  I called again only to be placed into a survey.  After several calls I tried the Title company.  I was told that the file had been closed.  I went through the process of reopening it and was told that the contractor had begun the process of obtaining a Deed in Lieu of Foreclosure but never finished it.  The title company was told to close the file.  I was never notified.

Here’s what happened.  Two years after receiving the paperwork, the “Contractor” finally got around to inspecting the property (it had sat empty for two years).  The area had become less desirable.  The “contractor’  decided it wasn’t worth having on the books.  They took the washer, dryer, range, refrigerator and anything of value but allowed the property to sit fallow until 2019 when I was notified through my parent’s neighbor.

I flew to Houston, changed the locks ($350.00) inspected the property and interviewed real estate agents and contractors.  Here’s what we found out, the HOA had not reroofed my parent’s townhome when they did rest of the line because their HOA payment was not up to date.  As a consequence, the HVAC system and hot water heater (located in the attic) rusted.  The best offer to date on the property is $60,000.  All other properties are listed at between $120,000 and $140,000.

Lesson learned:  Reverse Mortgages are for high end homes in good neighborhoods.  This house was never going to be more than $150,000 and it cost them as much to renovate it as to sell it.  But, if you need the money then do it!!!  It is incumbent upon you, the homeowner to look for reputable companies and compare fees.  I also suggest explaining to your executor what you’ve done and if there’s an issue that the executor should file the deed in lieu of foreclosure.