Legal Question in Real Estate Law in California

Re: Forclosure

A reverse mortgage becomes due and payable when the last borrower moves out or dies. There are no provisions to pay back the loan in instalments. The heirs have the following options:

1. Pay back the loan with their own cash;

2. Sell the home to a third party;

3. Use other cash in the estate to pay off the loan, if the terms of the will or trust so permit and assuming there is sufficient cash, which there usually isn't; or

4. The heirs can take out a conventional loan to pay off the reverse mortgage.

There is always the fifth alternative of doing nothing, which will result in a foreclosure. A little economic analysis will quickly show whether a particular reverse-mortgaged house should be dumped or saved.

With 1, 3 or 4, the heirs should consider whether leasing out the property is a part of the plan, and if so, how this will be managed and how the income or losses from the rental operation would be apportioned.

I'm curious about the statement that "no payments have been made since his death." You do understand that payments in a reverse mortgage are made BY the lender, not TO the lender? If no payments have been made since his death, the lender must have received notice of the death, which they tend to get by monitoring death certificates issued and other official sources, and turned off the tap, just as Social Security does. What is a little surprising, however, is that the lender had failed to get in contact with the heirs for eight months.

In any event, I assume you now know the identity of the lender, and perhaps you have received some kind of notice tipping you off as to a foreclosure intent or schedule. The executor or successor trustee should contact the lender at once for a frank discussion about the heirs' desires and intentions, and to learn the lender's policies and intentions in some detail. The lender almost certainly would prefer NOT to foreclose and will engage in talks about avoiding foreclosure by voluntary means.

Depending on where this is in the foreclosure process, it may be necessary to act real fast. If the property and heirs are in or near 94928, perhaps I can be of assistance; that's a city I drive through almost every day. Please contact me directly.