Reverse mortgage with an existing mortgage (insurance, loan, property tax, approved)

[shianti12]

My father fell on some hard times and got behind on his mortgage and now he is in foreclosure. He is in the process of trying to get a modification, but we don't know how that will work out since he isn't upside down. So I looked into a reverse mortgage for him and it my work but he will be short around 10k if the house appraises around the 250k value we got. My question is, are we able to ask the bank who has the mortgage to take a short payoff so that he can pay off the existing mortgage and maybe get some extra cash to catch up on extra bills that he also fell behind on. The mortgage balance is around 134k. Does anyone have any suggestions? It would be greatly appreciated.

Thanks,

[Pfhtex]

You can request a short-refinance, but I highly doubt that a bank will do a cash-out short refinance.

[Modification Specialist]

Originally Posted by shianti12

My father fell on some hard times and got behind on his mortgage and now he is in foreclosure. He is in the process of trying to get a modification, but we don't know how that will work out since he isn't upside down. So I looked into a reverse mortgage for him and it my work but he will be short around 10k if the house appraises around the 250k value we got. My question is, are we able to ask the bank who has the mortgage to take a short payoff so that he can pay off the existing mortgage and maybe get some extra cash to catch up on extra bills that he also fell behind on. The mortgage balance is around 134k. Does anyone have any suggestions? It would be greatly appreciated.

Thanks,

Modifications are based on a pass/fail score of a net present value (NPV) test. Each lender has their own guidelines tabulating the score.

Predicting what the lender will do, they will choose the most profitably outcome for them. The lender is control of a modification when a borrower work's directly with them . This is a one way direction for a flow of information and documents. It's a waiting game, and it's all about profit....(their profit).

As to your question on value. The lender has the advantage if there's equity, to move faster towards foreclosure. Compared to being upside down with no equity, there's no motivation for them to move quicker.

Lenders are not looking to do you any favors, the requirement is being able to afford at least a minimum payment. The final (higher) payment after a modification is determined by the monthly income.

If there's enough income to pay above the minimum payment, chances are good for being approved. If the income drops to not being able to afford a minimum payment. Most likely will be denied for a modification because his loan is no longer profitable.

For you recommend a modification to save the home. Need to analyze your fathers financial information to review where he is and what needs to be done. His lender will not provide any information till their final determination. If there is not-enough income for him, need to add more income (for example a contribution from you). The trick is not showing too much income where the lender raises the payment. You still have to show enough for the total house hold income to show affordability. To comment further need more information - father's gross income, lender, balance ($134k), payment, months late, yearly tax and HO insurance info and the state you live in.

Reverse mortgages - the key to understanding these types of loan are determined by the equity and value. There's no income or credit score requirement, but you need to have a than a 50% LTV (loan to value) score (plus be over the age of 62). If he has enough equity he can pay off his debts, and come current of the mortgage. I personally do not like reverse mortgages' seen cases fail where siblings trying desperately after a parents passing try to save the home they grew up in.

The sibling's are first in line to buy the property. It's regularly a losing battle because amount of backwards negative amortization, the once smaller principle is now a very large amount. A new loan is needed to payoff the reverse mortgage, which will not be affordable with other bills and debts.

"Short Payoff" (as in short sale) involves selling the property (moving out) and settling on the mortgage less then what is owed. There is no money to be taking out, your basically giving the house back to the bank. Some states allow deficiency judgements allowing the lender to come after you years later for the difference between what was settled to what was owed. I do not know your state or situation, there is an IRS guideline. Getting protection his he receives a 1099c.

Every situation is different, could write a book to thoroughly explain this...lol..

[LOL_Whut]

If his house is $250k and his mortgage is $134k, why doesn't he sell it and get out from under the house he can't afford anymore? If he can't make the mortgage payments on a 134k mortgage, it sounds like he's hard-up enough that the repairs and utilities on a house will eventually overwhelm him.

If it goes to foreclosure, it will probably auction for less than you're expecting. He could end up losing most of his equity.

[REtoday]

There are private individuals who can help you and your Dad. They buy the house from your father, he lives in it free until he dies. He would have the money from the sale to live out his days in his home. This a a reverse mortgage on Steriods. However, unlike the reverse mortgage, this route charges no ridiculous fees etc., leaving more money for the home-owner, your Dad.

I have personally done this and helped many elderly people remain in there homes and not in a nursing facility, assisted living etc.

Its a win-win and its quite easy. Don't reinvent the wheel...

[anicon]

i've seen many instances of banks agreeing to short refinances on people getting reverse mortgages. i've also seen a lot of lenders refuse.

based on my experience, they won't agree to it unless you're behind on payments. they'll want to see bank statements and income proving you can no longer afford to make payments. they always ask for a mock HUD 1 Settlement Statement from the reverse mortgage company to make sure you're NOT walking away with cash. obviously the closer the payoff is to the principle balance of the existing loan, the better chance you have.

if his other debt is against the house or federal (back property taxes, irs liens, judgments ect) they would have to be paid off with the reverse mtg proceeds and this would be reflected on the mock hud 1. unsecured debt like credit cards won't get paid off.

if the modification goes through, even though you have a lower payment, banks typically add money to the back of the loan increasing the overall principle balance. this would hurt your chances if you then wanted to get a reverse mtg.

also- reverse mortgage are changing on October 1st, and again in January. On October 1st your father will qualify for roughly 15% less money.

[anicon]

this is purely my opinion, take it w/ a grain of salt:

I would go with this modification if he'll be able to afford it long term, or if he plans on selling the house in his lifetime. if his taxes and insurance go up in a year or two and he cant afford the payment again, what good was it?? also, if it's more important to him to leave money to his estate, than to have money to live on, this is a good option.

if your father is in poor health or close to reaching his life expectancy- I would consider selling or looking for a private investor like the above poster mentioned.

if your father is in good health, you expect him to live a long time, he wants to live the rest of his life in the home, and he doesn't care if there is any equity left in the house after he passes, consider the reverse mortgage.

if you decide to sell the house, do some rough math first. based on your figures he has 116k in equity. lets say after transfer taxes and paying a realtor ect he walks away with 100k. if he rents a place for $1,000 a month, in 8 years that money is gone. make sure he'll still have enough monthly income to afford rent and living expenses long term

[Miss Hepburn]

Originally Posted by REtoday

There are private individuals who can help you and your Dad. They buy the house from your father, he lives in it free until he dies.

I have personally done this and helped many elderly people remain in there homes and ...

You may not be around anymore...but who are these "private individuals"?