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Reverse mortgages and ownership rights

May 19, 2017
By ERIC FEICHTHALER - Real Estate Law , Cape Coral Daily Breeze

Dear Mr. Feichthaler,

My mother recently passed away. My mom and dad, who passed away five years ago, got a reverse mortgage for the property, which they used to consolidate credit card or other debts. I have been told that, in a reverse mortgage, the lender automatically becomes the owner of the property. Is this true?

-Jennifer B.

Dear Jennifer,

Thank you for your question, and my condolences for your loss. Reverse mortgages deserve an entire article on their own, but my response to you will focus on the issue of title.

The answer is no, the bank does not automatically become the owner of the property. The lien held by the reverse mortgage lender is just like a normal mortgage, which simply shows a debt owed by your parents, which is secured by their home. Technically, upon the death of both owners, the loan is immediately due. However, if you contact the lender and advise you are working on refinancing (or offer to pay off the loan) they will delay foreclosure proceedings.

One thing to know is that, just like the bank, the heirs of the property do not own the property yet, either. A probate may be necessary to pass title to the beneficiaries or heirs. Depending on many factors, family members who believe they are entitled to the property may not be once the probate is complete. It is important to speak with an attorney and provide all of the details before paying off a mortgage such as this.

Additionally, if the property is worth less than is owed on it, there may be no benefit to working with the lender or proceeding with probate.

If the bank does foreclose, that doesn't mean you and other heirs won't benefit. Any bid at foreclosure in excess of the amounts owed to the bank would be property of the estate potentially. This is another situation where a probate may be needed to entitle the heirs to the funds.

Like in many situations, be-fore spending substantial sums on a matter like this, particularly paying bills or satisfying mortgages, see an attorney to see what your rights and obligations are.

Eric P. Feichthaler has lived in Cape Coral for 28 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continued his service to the community through his chairmanship of the Harney Point Kiwanis Club KidsFest from 2011-2015, which provides a free day of fun and learning to thousands of Cape Coral families, and funds numerous scholarships. He has been married to his wife, Mary, for 14 years, and they have four children together. Recently, he earned his board certification in Real Estate Law from the Florida Bar. He is also a Supreme Court Certified Circuit Civil Mediator.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.



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