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Using a Reverse Mortgage to Prevent Foreclosure

Tags: reverse-mortgage-short-sale, foreclosure-reverse-mortgage

There is a certain beauty attached to a reverse mortgage that defies a traditional forward mortgage (that’s a regular mortgage usually used for home purchase). This is not a way to borrow money in the short term, or bridge your finance usually associated with foreclosure options. For senior citizens though, aged 62 years or older, a reverse mortgage can be the perfect vehicle for rescuing their homes if they are in danger of foreclosure. 

Today with the economy so poor many seniors are in the serious position of handling rising monthly outgoings while trying to live on a fixed income from a pension and other sources. Costs are on the rise, especially with medical expenses, gas and food. Some seniors are still trying to tackle an adjustable rate mortgage in an attempt to release money from their property but keep the costs as low as possible - this is a tough situation they can become involved in. This can back a senior into a corner where they need to decide to make a mortgage payment, pay a medical bill or put food on the table? This puts seniors in a position vulnerable to foreclosure.

There is a better way!

A reverse mortgage does not require any proof of income or heavy credit score qualifications. So if they are behind on the payments with a current loan, and even if the lender has filed defaults with a credit agency, the senior could still apply for a reverse mortgage. Once the loan closes on the reverse mortgage the senior can then pay off the other loan and make no more payments for the duration of their lives or until they sell their home. There are other criteria to meet but if the reverse loan completes the senior could be worry-free for the remainder of their lives.

The criteria is fairly simple. The youngest borrower must be 62 years or older for the HUD government insured program. There are alternative programs that are more flexible but this impacts the amount they will lend as well as the interest rates attached. The home must also meet the minimum requirements set out by the HUD. Single family homes, townhouses, modular homes on a permanent space, condos are all acceptable. There may be a request for further data if it is anything but a single family detached home, your reverse mortgage advisor will be able to expand on this.

The property should be well maintained and in need of no major repairs, sometimes funds can be set aside until the repairs are complete. There is only one credit element that needs to be considered, the borrower cannot be in default of a federally insured loan program. So if the senior is in default of an SBA or FHA insured program (or any other federal obligation) then they would not qualify for a reverse mortgage. Note though that if the home is delinquent on a FHA loan and the default notice has not been filed then then borrower would still qualify. If the default gets filed the borrower would then have to bring their account up to date and cure the default before they could continue with a reverse mortgage.

It is a pre-requisite that the borrower goes though counseling, the loan would be processed using an independent appraisal of the home and all title issues, trusts, conservatorships, etc will be reviewed before the mortgage is approved. This is not a speedy process. If a senior does decide to use a reverse mortgage to prevent foreclosure then they need to consider this as a long term solution and needs it to be actioned right away, as there may not be enough time to stop the foreclosure if the process gets delayed. Get in touch with a reputable reverse mortgage specialist and check out if this is a viable solution. It could be the answer you are looking for.