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Repayment of a Reverse Mortgage

Repayment of a Reverse Mortgage is required only when one of the following events takes place:

  • Death of the borrower or last co-borrower;
  • Sale of the home by the borrower;
  • Permanent move from the home by the borrower;
  • Another event after which the home is no longer the borrower’s principal residence; Failure to pay taxes or insurance;
  • Failure to maintain and repair the home;
  • Any other violation of the loan guidelines.

Once the loan becomes due and payable, the Estate has six months to repay the loan assuming the lender is kept informed of the progress made toward repayment per the loan guidelines The lender is required to initiate foreclosure if they do not have proof on file that an effort is being made to repay the loan within 30 days of the date of the Notice of Repayment.

The following situations will allow the lender to grant a six-month period to repay the loan assuming the necessary proof of effort to repay the loan is submitted to the lender:

  • If the Estate lists the property with a real estate agent the listing agreement will suffice as proof of effort to repay the loan.
  • If the Estate is selling the house on its own a copy of an ad in the newspaper will suffice as proof of effort to repay the loan.
  • If the Estate is taking out a loan to repay the mortgage a loan commitment letter will suffice as proof of effort to repay the loan.
  • If the Estate is in probate a letter from the Estate Attorney explaining the status will suffice as proof of effort to repay the loan.

After six months from the date that the demand letter is issued, the Estate may request a HUD extension of 90 days to repay the loan. The lender will need a written request stating why an extension is necessary. At the end of the 90-day period, the Estate may request another, final, 90-day extension if necessary.

Once the home is sold or the funds necessary to repay the loan have been obtained, the title company/escrow company/Attorney’s office will request payoff information and wire the money to the lender. They must then request the payoff in writing from the servicing department of the lender.

The following information must be included in the payoff request:

  • Signed authorization from estate representative;
  • Property address;
  • Closing date;
  • Return fax number or mailing address.

The lender will then send the payoff statement to the proper person. The loan will be paid off at closing out of the sale proceeds. The full amount owed must be paid at one time. After the lender receives the full payoff amount, they will cancel the mortgage as of record.

Be aware that as a reverse mortgage, this loan will increase by mortgage insurance premium and interest until repaid in full.

 

Additional information on Reverse Mortgages:

 

Contact

Sue Vrbaskovich
Reverse Mortgage Specialist
NMLS# 355380
504-834-1190, ext. 128

Marilyn Cox
Reverse Mortgage Specialist
NMLS# 685994
504-834-1190, ext. 357

 

These materials are not from HUD or FHA and were not approved by HUD or a government agency. Bank of New Orleans NMLS# 329248.

 

 

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