So yesterday my mother dropped the bomb on us that she had taken a reverse mortgage out on the house. We are out just outside the 3 day back-out period but I'm wondering if there's something we can do to get out of this. She did get a call from the notary today saying that nothing has been processed yet because the direct deposit paperwork wasn't signed.
What can we do? Does this missing paperwork restart the clock? If not is there another avenue? Any advice appreciated!
How to get mother out of a Reverse Mortgage
byu/midwestnuwanda inpersonalfinance
Posted by midwestnuwanda
15 Comments
Get to a real estate lawyer now! Get to the notary and see if they will keep from processing until your lawyer shows up. Tell the lender you have hired a lawyer to stop this thing. Do it all before the sun goes down.
>I’m wondering if there’s something we can do to get out of this.
Does **mom** want to get out it? Are you and the rest of the family going to provide the funds she was going to get from the reverse mortgage?
Unless there’s a mental faculty issue, mom’s house, mom’s money, mom’s decision.
Assuming that she did this for cash flow and she is of sound mind, what is your mother’s alternative *if* she is able to cancel? Are you prepared to step up and support her?
I would call the company and tell them to stop processing it.
Honestly, a lot of these companies will let you out if nothing has happened yet. It isn’t worth entering in to if they know that you are going to bring up legal issues right away.
If they refuse to, then bring in a lawyer.
>I’m wondering if there’s something we can do to get out of this.
Sure. She can call the lender, explain that she wants to back out of her contract, and ask how much it will cost to do so.
Worse comes to worst, she just pays off the loan balance. That’s a simple way to get it done.
Why did she take out a reverse mortgage? I assume she needs the money? Does she no longer need the money? How old is mom? Is she mentally competent?
To answer questions coming up about motive and intent: yes my mother wants out of this as well. The TLDR version is that she feels she got scammed.
The long version is that she took out a $58k reverse mortgage to pay $5k in back taxes. She felt pressured to make this decision because she was afraid she’d lose the house. She was embarrassed so she didn’t tell anyone it was going on until after the fact. Of the $58k, $53,000 of it went to taxes and fees on the loan itself, with the remainder going to the state and $132 going to her. Once we talked it through she realized she got duped.
As for paying it, yes I plan to step up and pay it.
Edit: typo
Yes, the missing paperwork should allow you to cancel the loan. Call the mortgage provider and talk to them with your mother on tne phone.
BTW, federal protections don’t allow you just to “take out” a reverse mortgage by signing up. The home value needs to be appraised. The borrower (your mom) needs to have taken a mandatory “class” on what is involved in a reverse mortgage.
There are many protections to borrowers these days.
Was it notarized with a specific date?
Sounds like a scam and a ton of fees. My mother had a similar thing happen. Thankfully we have the deed protection as her home is paid off. The company was trying to deed her house to them.
Oh man that’s rough. My dad almost did this a few years back – they make it sound so good on those TV commercials but it’s basically giving away your house equity for pennies.
So here’s the thing – if the direct deposit form isn’t signed yet, you might still have a shot. Call the lender TODAY and say you want to cancel. Don’t wait. The 3-day rule is federal but some states give you longer, and if key docs are missing they might not consider it “complete” yet.
Worst case, she can refinance out of it but that’s expensive AF. My buddy’s mom did a reverse mortgage then refi’d 6 months later – cost her like $8k in fees but saved her like $200k in equity long term.
Definitely worth talking to a real estate attorney though – most will do a free consult. Where are you located? Some states have stronger protections for seniors on these predatory loans.
You are 100% asking the wrong people.
As others have stated you need to see if this is the right direction by conferring with your mother and other family members.
First thing to do is call the company and see if they can cancel the deal for a nominal fee. There has to be a clause to get out of the deal. It probably won’t be cheap.
If that isn’t sufficient then you need to contact a lawyer.
Those fees are impossible. They are regulated by HUD, and they have to pass a benefits test in order to work. If the borrower is only getting 5k benefits/ 58k fees, it will NOT pass the benefits test, FHA would not allow. Go back and read the HUD1 Settlement Statement.
I hope OP’s mother is able to get out of this contract. I think it is fairly rare for a reverse mortgage to be a good choice, and they can be a real problem. I have an elderly family member with one and all communication with the issuing bank is ridiculously difficult. The potential for predatory practices is huge.
There’s just absolutely no way the numbers you’ve given are correct.
Just remember that reverse mortgages are not scams. They are a legitimate product that solves actual problems. Until and unless you fully understand the problem and alternative solutions, you can’t really say this is bad.
That being said, from your other comments it seems that the problem is just that your mom needed $5k to pay some back taxes. A reverse mortgage is NOT a good way to solve that problem. Instead, an ordinary 2nd mortgage could be a solution – but even that seems like overkill for such small money. An ordinary personal loan could work, a loan from a family member, or just selling some random thing worth $5k.