A parachute from high altitude is always a lifeline. When a retiree or a senior, whether still working or not, gets into potential trouble with a forward mortgage payment becoming unaffordable, a HECM Reverse Mortgage can serve as a financial lifeline.
If a current mortgage is delinquent, in default, or is forecasted to go that route it is imperative to address this situation to protect the homeowner’s home equity. A foreclosure by the mortgage lender will wipe out the home equity regardless of loan to value. There is no law that says the lender does not have the right to recover the money they lent even if a homeowner has a very significant percentage of home equity.
Retirees and seniors are especially at risk of this if they still have forward mortgages on their property with sizeable monthly payments relative to their income. Many of us would be surprised to see how many people in their mid- seventies carry such mortgages. This situation is more prevalent with many of our parents that are currently in the 68-78 age group. This is a somewhat silent remnant of the mortgage crisis.
In a situation where a mortgage is deemed no longer affordable it may be prudent to take out the existing forward mortgage and replace it with a Reverse, thereby creating monthly free cash flow and removing the delinquency that could threaten home equity. This eliminates the foreclosure risk and the required monthly principal and interest payment that is required each month with the forward mortgage, although applicable taxes and insurance are still required.
In this situation, it is always wise to take action and restore financial balance to the equation. Waiting for the lender to relent because you have been a good customer for ten years, or a false sense of security because you only owe a small percentage amount, is not the answer.
George H. Omilan
President-CEO - NMLS# 873983
Jefferson Mortgage Group LLC
Helping seniors with Reverse Mortgages in Virginia, Maryland and Pennsylvania.
Questions/Comments encouraged.