Servicing Corner continued from page 29
What if the servicer misses the first legal timeline? They are penalized by HUD in the form of a “debenture interest curtailment,” which is on average approximately $15,000 per loan, so the impact is severe even if the time- line is missed by only one day. How to Avoid Common Pitfalls Loan officers should not advise borrowers they will have 12 months to pay off the loan or sell the home. This is inaccurate. LOs should advise borrowers that their heirs need to contact the servicer as soon as possible after the borrower’s death or other events of default to find out what is required to obtain an extension. To obtain the most amount of time available under HUD’s guidelines: • Heirs should report the last borrower’s death imme- diately to the servicer using the phone number on the account statement. • The estate should send the death certificate, will, trust and probate documents to the servicer ASAP. • Borrowers and/or their heirs must act promptly when a loan is in default for any reason and keep the servicer updated. • Borrowers are encouraged to discuss end-of-life plan- ning with their heirs before the last borrower dies so heirs are prepared.
• If probate is required, the estate must not delay in opening probate. Identify the person who has the legal authority to act on behalf of the estate to make decisions and sign documents as soon as possible. • To execute a deed-in-lieu of foreclosure, the property must be in broom-swept condition, cleared of all personal belongings, and all fixtures and appliances in place. And there can be no other liens on the title other than the first and second reverse mortgage. • Before completing a transfer of title to the property, the servicer must have either received funds to pay off the loan in full, or an approved short sale or deed- in-lieu has been completed. • Until the loan is paid in full, the property is sold or a deed-in-lieu of foreclosure is recorded, the estate is responsible for paying all applicable property charges (taxes, insurance, homeowners association dues and assessments, etc.) • We suggest that loan officers and their borrowers watch an educational video titled Preparing your Heirs: What happens with my Reverse Mortgage when I pass away? at www.reversedepartment.com .
This article was submitted courtesy of Celink.
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30 REVERSE MORTGAGE / SEPTEMBER-OCTOBER 2024
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