Non-Borrowing Spouses on Reverse Mortgages May Be Able to Stay in Home After Borrowing Spouse Dies

FHA Mandate Allows Non-Borrowing Spouses to Remain in Their Home

When seniors are tight on money, they often turn to a reverse mortgage to help ease their finances. In cases where only one spouse is 62 or older, lenders will often still do the reverse mortgage and the non-borrowing spouse usually has to sign the loan document acknowledging the mortgage is being taken out. What many borrowers and non-borrowers don’t realize is that this will leave the non-borrowing spouse without a place to live once their spouse who got the loan dies! In my opinion, this should NEVER have been allowed to be the case. People in distress are turning to Reverse Mortgages for help only to have one of the spouses, the younger one, set-up to become homeless should the older spouse die first. I would argue that people who sign these loans are doing so under duress because they need financial relief and the lender is telling them that the only way they can get the loan is to get it without the younger spouse since that person is too young to qualify.

The good news is that FHA appears to have realized this terrible situation and it has tried to alleviate it with a mandate they put out in 2015 which states that Non-Borrowing Spouses on Reverse Mortgage May Be Able to Stay in Home After Borrowing Spouse Dies! Mortgagee Letter 2015-15 is the document that may help keep eligible non-borrowing spouses from being foreclosed on.

According to the Reverse Mortgage Daily, this change came about from many years of litigation of non-borrowing spouse plaintiffs.

As One Reverse Mortgage summed it up, “Certain eligible non-borrowing spouses may avoid foreclosure thanks to the new guidelines released by the FHA on Friday, June 12. According to the new guidelines, as released in Mortgagee Letter 2015-15, when a borrower passes away, a lender may choose to foreclose the home or use a Mortgagee Optional Election Assignment (MOE). The MOE further defers the repayment of the reverse mortgage for the non-borrowing spouse. In other words, non-borrowing spouses may have the opportunity to stay in their homes after their loved one’s passing.”

Of course, there  are criteria that have to be met for the Mortgagee Optional Election Assignment for Home Equity Conversion Mortgages (HECMs) with an FHA Case Number assigned prior to August 4, 2014

For cases that involve an Eligible Non-Borrowing Spouse and the FHA Case Number was assigned on or after August 4, 2014, there are additional eligibility criteria.

I am not going to kid you, the process is not as simple as just filling out a form. You may have to speak with a lender or someone else to help you make sense of all the terminology in the letter and to help you compile the packet you will need to submit, but don’t let that keep you from doing what needs to be done so you can keep your home. Think of it as compiling the information you would need to get a loan for your house because that is what it is. The task may seem daunting, but just take it step by step and you will get through it and hopefully come out with the mortgage assigned to you when you get to the end of the process.

Here is a link to an article by National Mortgage Professional Magazine to tell you more about it.

Hopefully in the future, they will allow currently “too young” spouses to be part of the Reverse Mortgage from the beginning so we don’t have people in these terrible situations.

 

Robin Watson-Bird, Ph.D. is a seasoned California Real Estate Broker and REALTOR based in Livermore CA who serves most of the Greater Bay Area and parts of the Central Valley.

Great News for People Who Did Short Sales in 2012 and 2013 in California!

Great News for People Who Did Short Sales in 2012 and 2013 in California!

Just got this great letter and had to pass it along!

December 4, 2013

Dear Robin,

The good news just keeps continuing.

As we anticipated, C.A.R. today received a letter from the California Franchise Tax Board (FTB), obtained by the State Board of Equalization, clarifying that California families who have lost their home in a short sale are not subject to state income tax liability on debt forgiveness “phantom income” they never received in a short sale.

Last month, in a letter to California Sen. Barbara Boxer, the Internal Revenue Service (IRS) recognized that the debt written off in a short sale does not constitute recourse debt under California law, and thus does not create so-called “cancellation of debt” income to the underwater home seller for federal income tax purposes. Following the IRS’s clarification, C.A.R. sought a similar ruling by the California FTB. Now with the FTB’s clarification, underwater home sellers also are assured that they are not subject to state income tax liability, rescuing tens of thousands of distressed home sellers from California tax liability for debt written off by lenders in short sales.

We are pleased with the recent clarifications issued by the IRS and the California Franchise Tax Board, which protect distressed homeowners from debt relief income tax associated with a short sale in California. We would like to thank Sen. Boxer and BOE member George Runner for their leadership in obtaining this guidance from the IRS and FTB. Distressed California homeowners can now avoid foreclosure or bankruptcy and can opt for a short sale instead, without incurring federal and state tax liability, even after the Mortgage Forgiveness Debt Relief Act of 2007 expires at the end of this year.

Sincerely,

Kevin Brown
2014 President
CALIFORNIA ASSOCIATION OF REALTORS®

Copyright © 2013 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)

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FREE Loan Modification Help is Coming to the Bay Area in Oakland, CA THURSDAY, OCTOBER 17 – MONDAY, OCTOBER 21

FREE Loan Modification Help is Coming to the Bay Area THURSDAY, OCTOBER 17 – MONDAY, OCTOBER 21
Losing your home? Been turned down for a loan modification by your bank? Need another modification, but your bank won’t help?

If you answered yes to any of these questions and you only own one property, your primary residence and you want to keep it, you need to make time to attend
NACA’s SAVE THE DREAM EVENT
OAKLAND, CA – Oakland Marriott City Center
1001 Broadway, Oakland, CA 94607
THURSDAY, OCTOBER 17 – MONDAY, OCTOBER 21
Hours are 8:00 a.m. to 6:00 p.m. each day
ALL NACA SERVICES ARE FREE!

Register: http://www.naca.com or call 1-888-499-6222. Walk-ins are Welcome!
NACA did a modification for my home in 2009 after my bank turned us down and was able to reduce our payment by $1500 per month! They cannot help everyone, but it is free and worth a shot. Plan to get there early and stay late–there is usually a line starting at 5:30-6AM and they are often there until midnight after they close the doors–you don’t have to stay that long, but many people do. Bring snacks, breakfast, lunch, dinner, drinks and something to read or do along with your bank statements, pay stubs, mortgage statements, tax bill, estimates or actual costs for your monthly expenses, and any other relevant financial paperwork you have and something to write with! It will likely take you two-three days to get through the process, so be prepared to wait and be patient. They will walk you through the process so don’t freak out. Just bring your stuff and be patient and if the servicer for your loan has delegated authority to make a decision on your loan, then you should know by the end of your process if you qualify for a loan modification or not and what the exact payment and details will be. If they do not have delegated authority, NACA will package your loan modification and negotiate it with your bank for you (even if you have been previously turned down by your bank and even if you are currently in a loan modification with your bank!)

I do not work for NACA or get anything for referring people to them. I just know they were able to help me as well as other people I know. They were not able to help everyone I know who went, but that had to do more with the investor who owned their loan and not NACA’s ability to help. It is worth a shot!

 

If you attend, let me know how it goes!

It is Now Legal to Short Sale Your Home, Lease it Back, and then Buy it Later at Today’s Low Price!!

Ever since I have been helping homeowners short sale their properties since 2007, I have been asked two common questions:

 

1) Can I stay and lease back my house from the new owner?

2) Can I short sale the property to myself or buy it back later after I do a short sale?

 

Until recently, many banks would not allow a seller to remain in a property as a renter after they completed a short sale and none would allow an agreement that would arrange up front for the seller to potentially buy back the home at the cheaper price.

 

Now, those two things are legally possible if the seller/borrower qualifies and their bank agrees!

 

Making Home Affordable Program – Administrative Clarifications Supplemental Directive 11-02 March 30, 2011 Page 8 states the following:

 

Supplemental Directive 11-02 March 30, 2011 Page 8 states the following:

 

Sales to Non-Profit Housing Organizations

Section 7.3 of Chapter IV of the Handbook requires that a short sale be an arm’s length

transaction. This Supplemental Directive amends this restriction to allow servicers the discretion to approve sales to non-profit organizations with the stated purpose that the property will be rented or resold to the borrower, so long as all other HAFA program requirements are met.

 

Servicers offering programs of this type must include program descriptions and conditions in their HAFA Policy. Servicers must retain in the servicing system and/or mortgage file the evidence provided during the HAFA evaluation demonstrating that the organization was a nonprofit organization.

 

Under these circumstances, servicers must remove certain of the applicable “arm’s length

transaction” requirements from the SSA, the Request for Approval of Short Sale and the

Alternative RASS. These forms will be updated to reference these changes and will be available on www.HMPadmin.com.

 

Not All Agents Are Certified to Assist Homeowners With This Process!

 

In order to provide the service to homeowners, agents have to be certified with one or more of the approved NonProfit organizations. I am one of the very few agents in the East Bay, Tri-Valley area who are certified with one or more of the approved NonProfit Organizations to offer this program to homeowners. Fresh Start is one of those programs.

 

 

Like with any program, not every homeowner will qualify, but if you would like more information about the HAFA Short Sale Lease back Program and to see if you may qualify, feel free to give me a call at 925-577-8692, send me a message through this site.

 

My goal is to always help homeowners know what all their options are in order to avoid foreclosure so  they can make the best choice for their situation and family. I love helping people find a way to stay in their home when that is what they really want to do and I look forward to being able to help people do just that with this program!

Free Loan Modification Help from NACA will be available in San Jose June 17-22 and LA June 25-29

If you have a loan that is not affordable and you would like to see if your loan can be modified so that you can stay in your home with an affordable long term mortgage payment, get down to the San Jose Convention Center June 17-22 or the LA Sports Arena Center June 25-29.

I have blogged about NACA in the past–they are the organization that was able to get me and several people I know and thousands of others great loan modifications after our banks had already denied us…and they did it for FREE! They saved me about $1620 per month!
If you only own one property (the American Dream), or one property that has a mortgage on it, then NACA may be able to help you too, even if your bank has already denied your loan modification in the past, once, twoce, or even more times than that! They cannot help everybody, but free is free and it is worth a shot! NACA has special contracts with varoius lenders, so if they cannot get you a modification, I do not believe anyone can.

You can attend one of the events like I did which can take 2-3 days to get done or you can do the process online and/or via one of their local offices; Oakland is the closest office to the Bay Area.

From what I have heard, people have the best success by attending the events. A “same day solution” may take 2-3 days to actually happen because of the large number of people who attend the events in person, but it is well worth all the time sitting and waiting, and overnight expenses if they are able to help you. I suggest taking food and drinks in with you so that you do not have to pay the high food prices and eat junk food while you are there. Take a good book or something to read or do to occupy your time while you wait. If you cannot get through the entire process at one event, you can go to one of the future events. A friend of mine started her process in San Francisco and finished it in Florida! It was well worth it for her because she was able to get them to forgive a very large part of the balance and got her interest rate reduced as well.

If your loan is owned by the bank you make your payments to and the bank is one that they work with, then you should have your modification terms before you leave the event, aka your “same day solution.” If your loan is only serviced by the bank you write your check to, and is actually owned by an investor or group of investors, then they can write up a proposal of new loan terms that represent an affordable mortgage solution for you and get them submitted to your lender, but you will usually have to wait 30-45 days or so to see if the investor(s) who own(s) your loan will agree to the changes. Please note that some investors will NOT modify a loan regardless of circumstances so in those cases, NACA will not be able to help you, but you will not know unless you go and if you want to keep your home it may be a good alternative to forclosure for you.

From the NACA.com website:
“NACA’s historic Save the Dream Tour has been an incredible success with hundreds of thousands of participants. Thousands of homeowners received same day solutions saving hundreds some over $1,000 a month. All of NACA’s services are FREE.

You can get a list of the cities they plan to be in and event dates along with more details about NACA and theor Save the Dream Tours at http://NACA.com

Visit NACA.com to find out more.
If you go to NACA, I would love to hear your feedback!
If NACA cannot help you and you decide that you need to sell your home or you would like to know if you have other options you did not know about, my team would be happy to help you! You can contact me directly at 925-577-8692.

Good luck!

Your Friend in Real Estate,

Robin

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