Reverse mortgage mess for heirs

[creep54]

What is the name of your state (only U.S. law)? (CT) My 90 year old father-in-law died in December 2014 after being in a nursing home (self-pay, not Medicaid). He had a reverse mortgage on his second wife’s family homestead that he took out in 2008 as a lump sum. He gave away a lot of the money to his wife’s family before she died in 2011. The 3 heirs in his will are being named as defendants in a foreclosure suit. The Secretary of Housing and Urban Development is also named as a defendant in the suit. These heirs are my husband who was appointed executor of the estate, his father’s brother who was listed as a contingent heir and executor if my husband died before his father died, and a niece of his late wife’s. This niece was listed in the will as “if I shall die while still owning an interest in 112 Hickory Lane, Sunnyville, CT my wife’s niece Louise Jones shall inherit my interest”. Obviously, he thought his house was worth a lot more than it ended up being appraised for. Due to lack of upkeep, the house is financially underwater – about $50,000 underwater. None of his wife's family members are interested in purchasing it although they bitterly complained when we moved dad to an elderly housing community, cleaned out the house and donated the contents to Goodwill and the dump. They were very angry when they found out about the reverse mortgage. The estate is mostly insolvent, except for one 10-year old car that was left to my husband. Any other assets that my father-in-law had were jointly held with my husband an IRA and a small checking account.
It was my understanding that this was a non-recourse loan and the borrower never ends up owing more than the house is worth. But the bank is NOT naming the estate in the foreclosure suit, but refers to the 3 individuals named as “heirs at law” and HUD. I didn’t think that relatives were responsible for their parents’ debts! What role does HUD play in all of this? We have asked the bank to fast track this because we do not want to have anything to do with this house.

 

[Ohiogal]

The bank in order to get the home needs to foreclose. Why do you believe that your husband would owe anything? Due process if required to deprive someone of their property -- in this case the heirs who have a stake in the home. Hence, why they are named personally.

 

[FlyingRon]

Ohio is correct, they will name anybody who has a potential ownership or security interest in the property. They're required to. It doesn't mean that they are seeking any recourse against you other than that your interests in the property will be extinguished by the foreclosure. Do you think they're going to get any money out of Julian Castro?

 

[LdiJ]

Again...to add my two cents worth...

The heirs are not responsible for the debt. They are only being named in the foreclosure lawsuit because the bank will be depriving them of the asset, therefore the bank must name them. There is also no reason for them to spend the money to hire an attorney to represent them.

 

[creep54]

thank you all

It looks like three long-time experts here have posted replies that have greatly eased my mind. What raised this question was my viewing of the State of Connecticut Judicial website where the bank in question and their attorneys have sued many estates for reverse mortgage deficiencies. I was afraid that since the estate was basically insolvent they would try to come after all of us. I guess we just have to watch this thing play out and file the proper paperwork when required to do so.

 

[LdiJ]

It looks like three long-time experts here have posted replies that have greatly eased my mind. What raised this question was my viewing of the State of Connecticut Judicial website where the bank in question and their attorneys have sued many estates for reverse mortgage deficiencies. I was afraid that since the estate was basically insolvent they would try to come after all of us. I guess we just have to watch this thing play out and file the proper paperwork when required to do so.

Ah but there is the difference. They have sued ESTATES for the deficiencies. The estate is a separate entity from the heirs. Lets say that your father in law had an estate with significant other assets, other real estate, bank accounts, stocks and bonds etc., that did not pass outside of the estate. In that case the mortgage company would be in their right to sue the estate to attempt to recover the money before the estate assets were distributed to the heirs. That is entirely different than the heirs being responsible for the deficiency.

Just understand that none of the heirs will EVER be responsible for the deficiency debt.