Questions and Answers

Questions and Answers

How to Handle a Reverse Mortgage After Death

How to Handle a Reverse Mortgage After Death

Ralph Miller
July 11th, 2017

What to do About a Reverse Mortgage After Death

There are five options for handling a reverse mortgage after the death of the borrower.

  • Keep the property. In this situation, you must pay the loan in full, but never more than 95% of the property’s appraised value.
  • Sell the property. If the home is worth more than the loan amount, the heirs may sell the home, pay off the loan, and keep the remainder of the money from the sale.
  • Complete a short sale. Sell the property for 95% of its appraised value in a short sale to satisfy the loan.
  • Walk away. Walking away from the home will result in foreclosure and alleviates any responsibility for paying off the loan.
  • Sign a deed-in-lieu of foreclosure. This titles the property back to the lender. This allows the house to go into reverse mortgage foreclosure and gives the seller the property in order to satisfy the loan.

Reverse Mortgage After Death Timeline

Here’s a timeline of what to expect in order to handle a reverse mortgage after death.

30 days. Within 30 days of receiving notice of the death of the borrower, the loan servicer will send a due and payable notice to the estate, along with information on the reverse loan and the eligibility requirements for a deferral period of the reverse mortgage after death.

60 days. Within 30 days of receiving the due and payable notice, the estate must respond to the notice with a letter of intent as to the property. Additionally, the mortgagees must obtain an appraisal of the property no later than 30 days after the due and payable notice is sent. The surviving, non-borrowing spouse may apply for a deferral if they meet the requirements.

2-6 months. During this time, the estate has the opportunity to sell the house, or otherwise satisfy the loan. Be aware that interest on the loan accrues during this time.

6 months. Within six months of the death of the last surviving mortgagor, the loan servicer may begin foreclosure proceedings if someone does not pay the loan amount. If a deferral has been issued, then the foreclosure proceedings may begin six months after the end of the deferral.

12 months. The estate may apply for two extensions in 3-month intervals. This gives them up to 12 months from the death of the borrower to sell the property or satisfy the loan.

Spouse’s Responsibility for the Reverse Mortgage After Death of the Borrower

When one spouse dies, but the surviving spouse is a borrower on the reverse mortgage, the terms of the loan do not change. Also, the surviving spouse may continue to live in the house.

If the surviving spouse is not a borrower, then the mortgagee will send a letter stating the requirements for a deferral period before the loan is due and payable. If the spouse doesn’t meet a requirement of the deferral period, they have 30 days to remedy the situation. Otherwise, a notice that the loan is due and payable will be issued.

Once receiving a notice that the loan is due and payable, the spouse may choose to sell the home, hand the property over to the lender, or keep the home by paying the reverse loan amount.

During the time after the death of the borrower, the spouse must maintain the property and pay property taxes. Failure to do so may result in action against the spouse by the loan servicer. This may lead to foreclosure on the property.

Heirs’ Responsibility for the Reverse Mortgage After Death of the Borrower

After the death of the borrower, the heirs will receive a letter from the loan servicer. The letter will offer information on the borrower’s estate, details on the reverse mortgage, and available options for satisfying the loan.

It is the responsibility of the heirs to reply to the loan servicer with the intentions of keeping the property, selling it, or handing it over to the servicer. Here’s some advice for children of seniors for handling the reverse mortgage after death.

In order to keep the property, the loan must be paid off. The cost to pay off the loan is never more than 95% of the appraised value of the home, even if the loan amount is more. If the property is worth more than the amount owed, the heirs may choose to sell the home and keep the difference.

If the home isn’t worth as much as the loan, the heirs may choose to sign a deed-in-lieu of foreclosure. This turns the house over to the lender, who will sell it to get their money back. If the loan balance exceeds the home’s value, then you won’t owe anything additional by choosing this option.

Whatever you choose to do, keeping good communication between yourself and the loan servicer is imperative. With the proper documentation, you may have up to a year to sell the home before it must be turned over. If you fail to provide the proper documentation, the loan servicer may begin foreclosure proceedings within six months.

Reverse Mortgage Facts Non-Borrowers Should Consider

Here are a few things you need to know prior to inheriting a reverse mortgage after the death of the borrower.

Understand reverse mortgages. Most reverse mortgages are home equity conversion mortgages (HECMs), which are subject to FHA rules. Non-HECMs may not follow these same rules. Speak with a mortgage professional, accountant, and other trusted advisors to help you understand the ins and outs of a reverse mortgage.

Communicate with the loan servicer. After the death of the borrower, keeping in good communication with the loan servicer is vital to ensure a smooth transition.

Selling the property. If the loan amount is less than the house is worth, then selling the property may make the most sense. Here are some tips when selling a house with a reverse mortgage.

Non-recourse. A reverse mortgage is a non-recourse loan. This means borrowers are never responsible for more than 95% of the home’s appraised value. Even if the loan exceeds that amount.

Avoiding negative financial impact. You may avoid the responsibility of paying the loan amount, including the negative financial impact of the loan amount exceeding the home’s value, by completing a deed-in-lieu of foreclosure, short sale, or by walking away from the home. This will allow the loan servicer to begin foreclosure proceedings.

Six months to complete the transaction. Once you’ve decided to sell the property, or pay off the loan, you have six months from the death of the borrower to complete the transaction. After this time, the loan servicer may proceed with foreclosure.

Time extensions. If you need additional time to market and sell the property before foreclosure proceedings ensue, you may request up to two 90-day extensions. This is subject to HUD approval.

Avoiding foreclosure. If you do not respond to the due and payable notice, if the house does not sell before your extension expires, or the property taxes and insurance are not paid, then the loan servicer may begin foreclosure. Work closely with your loan servicer to assure all documentation is completed properly to avoid early foreclosure.

For additional information, please call Linda Fessler at 213-446-6766 for a free consultation.

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Johnson and Johnson Baby Powder Loses Again

On Thursday, a jury awarded $110.5 million to a woman who used the company’s talcum-based products. The suit alleged that plaintiff developed cancer after using Johnson & Johnson’s Baby Powder and Shower to Shower Powder for decades.

“Once again, we’ve shown that these companies ignored the scientific evidence and continue to deny their responsibilities to the women of America,” said her attorney.

Despite its losses, Johnson & Johnson maintains that its feminine hygiene products are safe to use; however, studies have tied talcum powder to increased cancer risk. Researchers point out that the mineral talc contains asbestos, which is known to cause cancer, but the asbestos-free talc that many companies use has yielded mixed results. In 1982 a study found that women who used talc-based products around their genitals had a 92% increased risk of ovarian cancer, but industry experts argue that many studies are biased because they rely only on estimations from consumers about how much talc they were exposed to over the years.

In 2006, The International Agency for Research on Cancer classified talc use on genitals as “possibly carcinogenic”.

Johnson & Johnson is appealing Thursday’s decision. However, Reuters reports that the company faces as many as 2,400 lawsuits over its talc-based products.

“We are preparing for additional trials this year and we continue to defend the safety of Johnson’s Baby Powder. . . We deeply sympathize with the women and families impacted by ovarian cancer,” the company said.

If you need additional info about this or any other legal issue, call Attorney Linda Fessler at 213-446-6766 for a free consultation.

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CFPB, Florida Sue Ocwen For Mortgage Servicing Issues

 

By Evan Weinberger

The Consumer Financial Protection Bureau on Thursday sued mortgage service company Ocwen Financial Corp in Florida federal court alleging that the firm’s servicing database is riddled with inaccuracies and incomplete information that resulted in wrongful foreclosure proceedings against around 1,000 families, the same day Florida filed a similar suit against the company.
The CFPB’s complaint, filed in federal district court in West Palm Beach, Florida, came at the same time that Florida Attorney General Pam Bondi and the state’s Office of Financial Regulation Commissioner Drew J. Breakspear filed their own complaint against Ocwen. North Carolina and more than 20 other states also filed cease and desist orders against Ocwen and its subsidiaries, stopping them from purchasing additional mortgage servicing rights until they can prove they’re able to handle customer escrow accounts.

Those combined actions have put West Palm Beach-based Ocwen’s future in question. …

The CFPB alleges that the company’s faulty data management practices and other problems inside the company led to Ocwen failing consumers who have no choice in mortgage servicing options.

“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” CFPB Director Richard Cordray said in a statement. “Borrowers have no say over who services their mortgage, so the bureau will remain vigilant to ensure they get fair treatment.”

The major culprit behind the problems is Ocwen’s proprietary data system, known as REALServicing, the CFPB said. The system was intended to accurately record payments, communicate payment information with borrowers and maintain loan balance information.

But a great deal of the information inside of the REALServicing system is inaccurate or incomplete, and the system itself generated errors because of poor programming, the CFPB said.

To combat those problems, Ocwen set up manual workarounds through which employees could input data directly, but in many cases that did not work, the CFPB said.

One of Ocwen’s top executives called the problems with the system “ridiculous,” according to the complaint.

“An absolute train wreck. I know there’s no shot in hell, but if I could change systems tomorrow I would,” Ocwen’s head of servicing said in an internal email about the technology problems that the CFPB included in the complaint.

Those problems led to significant error rates.

According to the complaint, Ocwen reported that 72 percent of the loans it verified contained data errors or incomplete information in April 2014. The problem rate rose to 90 percent in a March 2016 review, the complaint said.

And when there were data problems, there were improper foreclosures, the CFPB said. According to the complaint, Ocwen wrongfully commenced foreclosure practices on around 1,000 families during the relevant time period and engaged in many improper foreclosure sales, according to the complaint.

The CFPB also cited problems with Ocwen’s crediting of borrower payments, escrow accounts, hazard and mortgage insurance and in other areas.

Ocwen was included in a 2012 nationwide mortgage settlement and has received positive reports from the settlement’s monitors, and it has reached separate settlements with regulators in California and New York as well.

Thursday’s action is also the second major enforcement action the CFPB has filed against Ocwen, which agreed to pay $2 billion to settle a CFPB lawsuit in December 2013.

But Cara Petersen, the CFPB’s deputy enforcement director, said on a conference call announcing its suit against Ocwen that the conduct at issue in the instant case happened after that settlement.

“This action involves conduct since that time, since 2013, where Ocwen has continued to fall down on the job with borrowers,” she said.

However, the CFPB’s action comes as President Donald Trump weighs whether to fire Cordray, and Republicans in Congress draw up plans to significantly reshape the bureau.
(Emphasis added)

Ocwen disputed the claims put forward by the CFPB and vowed a vigorous defense. The company said that it is a recognized leader in mortgage servicing that has improved its practices, and that the CFPB’s case was just a part of the broader fight over its future.

“Given these facts, today’s suit can only be viewed as a politically-motivated attempt by the CFPB to grab headlines in reaction to the change of administration and recent scrutiny of the CFPB’s activities,” Ocwen said in a statement. …

The case is Consumer Financial Protection Bureau v. Ocwen Financial Corp., case number 9:17-cv-80495, in the U.S. District Court for the Southern District of Florida.

 

Fessler’s follow up:
Mortgage servicer Ocwen Financial Corp. has challenged the constitutionality of the Consumer Financial Protection Bureau, in an effort to dodge the allegations that its faulty servicing database resulted in wrongful foreclosure proceedings against at least 1,000 people.

 

For all those who might have experienced problems with Ocwen (or other banks and servicers), it might be advisable to call your U.S. Senators and Representatives and tell them that we need a watchdog like the Consumer Financial Protection Board to keep renegade loan services in line:  let the agency do its work. Just a thought.

 

If you need further information, call Attorney Linda Fessler at 213-446-6766 for a free consultation.

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4 Actions Against Notaries and Their Role in Foreclosures

There is such a thing as Notary Abuse: when the notary does not obey the rules of the state where she has been licensed. I have seen notaries from one state notarize a document that was signed by a person who works in another state. There seems to have been a lot of notary abuse during the recession. These involved in many cases homes that were in foreclosure. The foreclosures involved a lot of assignments that were notarized. Whether they were notarized in a fraudulent manner is worthy of investigation. Notaries are required to have bonds to insure the public against notary abuse. The amount of these bonds vary from state to state. If a person feels that there has been notary abuse or fraud, they can file a claim against the bond for their damages. They can also sue the notary. They can file a complaint with the Secretary of State. And finally they can report it to the police.

Each state has rules that the notary must follow. For example here is a section of the California rules:

Secretary of State, Disciplinary Guidelines 2012

VIOLATION OF GOVERNMENT CODE SECTION 8214.1(e):

Adjudged Liable for Damages in Any Suit Grounded in Fraud, Misrepresentation, Violation of State Regulatory Laws or Failure to Discharge Fully and Faithfully the Duties of a Notary Public:

A notary public applicant or commissioned notary public adjudged liable for damages in a case involving fraud, misrepresentation, violation of state regulatory laws or failure to fully and faithfully discharge the duties of the office is in direct conflict with the most fundamental requirements of the office of a notary public. …

(2) If a commissioned notary public is adjudged liable for damages in any suit grounded in fraud, misrepresentation or violation of state regulatory laws or failure to discharge fully and faithfully the duties of a notary public, the recommended action is: Revocation of the commission.

Example 1: A judgment entered against a notary public in a civil action in which the notary public performed a fraudulent notarial act, such as executing an acknowledgment without requiring the signer to appear in person before the notary public.

 

Example 1 seems to be the violation that is most common in foreclosure proceedings. Of course, there could also be fraud if the document is signed by someone other than the notary licensed under a particular seal.

It therefore appears that a person who is a victim of such fraud could do one or more of the following:

File a complaint with the Secretary of State;

File a lawsuit against the notary;

File a claim against the notary’s bond;

File a complaint with the police.

Proving that a notary committed fraud in fulfilling his/her duties could go a long way in proving that there was a wrongful foreclosure of a property.

If you have any questions about this or any legal issue, please call Attorney Linda Fessler at 213-446-6766 for a free consultation.

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7— a way to get out of debt — How Bankruptcy Works

 

 One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a “fresh start.” The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations.

A chapter 7 case begins with the debtor filing a petition with the bankruptcy court.  In addition to the petition, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. Debtors must also provide a copy of the tax returns for the last three years. They must file: a certificate of credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts.

The courts must charge a $245 case filing fee, a $75 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the court upon filing. If a joint petition is filed, only one filing fee, one administrative fee, and one trustee surcharge are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case.

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide to his/her attorney the following information:

  1. A list of all creditors and the amount and nature of their claims;
  2. The source, amount, and frequency of the debtor’s income;
  3. A list of all of the debtor’s property; and
  4. A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Filing a petition under chapter 7 “automatically stays” (stops) most collection actions against the debtor or the debtor’s property. But filing the petition does not stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Between 21 and 40 days after the petition is filed, the case trustee will hold a meeting of creditors. During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding the debtor’s financial affairs and property. 11 U.S.C. § 343. If a husband and wife have filed a joint petition, they both must attend the creditors’ meeting and answer questions.

The Chapter 7 Discharge

After the meeting of creditors, the court will make a decision as to whether there should be a discharge. A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing.

 

If you need to file a bankruptcy, please call Attorney Linda Fessler at 213-446-6766 for a free consultation.

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BANK OF AMERICA TO PAY $46,000,000

 

Bank of America was ordered to pay a $46 million judgment last week after it wrongfully foreclosed on a California couple during the recession.

The order by Sacramento bankruptcy court Judge Christopher M. Klein describes in detail how the bank improperly engaged and foreclosed on Erik and Renee Sundquist’s Lincoln residence.

The judge awarded $1 million in actual damages to the couple. Klein gave the rest of the sum to outside entities focused on consumer law and education. The trouble began in 2009 when the Charlotte, N.C.-based bank reportedly asked the couple to default on the loan in order to obtain a mortgage modification. But the bank did not honor that promise.

At that point, the Sundquists filed for Chapter 13 bankruptcy, which triggered a stay on the foreclosure process. The bank disregarded the stay and started eviction proceedings. “Without identifying themselves, they staked out the premises, tailed the Sundquists, knocked on doors, knocked on windows, and rang doorbells, all to the terror of the Sundquist family,” Klein wrote in a 109-page opinion for the ruling.

Bank of America eventually gained possession of the property for six months, after which it then agreed that the foreclosure had been a mistake. The company returned the keys to the Sundquists. When they re-entered their home, the major appliances had been removed and the lawn was dead, according to the court.

“Throughout, the Sundquists were acting in good faith, not realizing that Bank of America had no intention of acting in good faith,” Klein wrote.

 

If you need further help with this or any other issue, please call Attorney Linda Fessler at 213-446-6766 for a free consultation.

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