More Concerns Over Reverse Mortgages

By Edith Lank

November 17, 2013 5 min read

Dear Ms. Lank: My dad has a reverse mortgage. It had a cap of $150,000. The lender sold it to another company and they raised the amount he could borrow to $180,000. The tax-assessed value on his house is $224,140 but I know it wouldn't sell for that, since it needs major updating. I've read several Internet articles that state that heirs of reverse mortgage owners cannot be liable for any amount not covered in the sale of the house. But is that in fact true? — K. S.

Answer: Probably.

If, as is likely, your father has an FHA-insured reverse mortgage, the debt that's piling up includes premiums for mortgage insurance. The insurance would make up the difference if the house didn't sell for enough to pay off the loan. His estate would not be responsible; neither would your dad if he sold during his lifetime.

This provision for reverse mortgages, by the way, does not apply with other FHA mortgage insurance programs. With those, lenders are protected against loss, but the borrower may still be held liable for any shortfall.

Using Right of Way

Dear Ms. Lank: If there is a right of way on a property, can anyone arbitrarily use this right of way without the landowner's permission? The right of way in question leads to another property. Thank you. — via askedith.com

Answer: Sorry to hear that you're having problems. A right of way might be public, allowing anyone, for example, to cross your property to get to a beach. Or — and this sounds more likely — it may be private, if your neighbors must use it to get to their property. In that case, I assume it would also allow access to the neighbors' visitors, mail carrier and UPS deliveryman. What it usually wouldn't allow would be setting up a tent and camping on that path or road. The permitted use would typically be for access only — going back and forth.

If that right of way has been filed in the county's public records office in the form of an easement, you can go down and see what it says. Or you can take the matter to a lawyer who will investigate and advise whether you have legal remedies for whatever is troubling you.

Don't Own the Land

Dear Edith: What are the pitfalls of purchasing a beach house in a new lakeside development where you don't own the land that your house is on? You pay a monthly fee for ground and road upkeep. This is a three-season home.

It doesn't sound safe to me. What if the company that owns the land defaults on its taxes or other bank payments? How would you get a home loan if you don't own the land? Sounds to me like a trailer park without the wheels! — P.

Answer: Sounds to me like a condominium arrangement. Before you bought in, you should receive written information about the financial health of the organization. Your lawyer or CPA could help analyze the figures. As for a loan: I'm willing to bet the developer has recommendations about where to apply.

Years ago we were told the word "trailer" was politically incorrect. For a while there we were supposed to say "mobile home" and now I believe the respectful term is "manufactured housing."

Short Sale Frustration

Dear Edith: Your column on foreclosures says talk to the bank; they do not want to own property. Well, I put a deposit to buy a house being sold on a short sale. From there it went to the bank. The bank responded that the contract listed an incomplete address on the property. The seller's real estate agent and I have tried everything, even offering full price, but nothing is happening. The real estate agent says the proof of address was sent but the bank will not respond. The corporate office of the bank says they cannot talk to me unless the seller gives them written permission. The seller says he is going to consider a deed in lieu and I will never find an answer. I still want this house! — Email

Answer: I expect some short sales go well, but they're not the ones who write to me. I hear about frustration, mistakes in documentation, trouble finding someone to talk to, negotiations dragging out for months and the like. I get the impression that many banks just don't know how to handle real estate sales. It's probably best, when trying to buy a short sale, to find a real estate broker who specializes in those transactions.

Edith Lank will respond personally to any question sent to www.askedith.com or to 240 Hemingway Drive, Rochester NY 14620

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