If you delay or ignore the notification, you could lose your home to foreclosure. Once the borrower fails to make a payment, the managing entity will report the late payment of the property. This letter should include information about the money in advance to cover the property charge and any loss mitigation that the lender may offer. If the borrower does not correct the default, the loan may be declared overdue and the servicing entity must send a notice of maturity and payment.
The due and payment notice will give the borrower thirty days to respond, describe available loss mitigation options, and describe the option to sell the home or execute a deed instead of foreclosure. Lenders must also refer borrowers to a HUD-approved housing counseling agency before starting foreclosure. With respect to reverse mortgages under sections 280 or 280-a of the New York Real Estate Act, lenders can only collect charges authorized by the Department in Part 79.8.The Department of Housing and Urban Development (HUD) insures nearly all reverse mortgages through its Mortgage Equity Conversion (HECM) mortgage program. However, it's important to understand that the insurance offered by the federal government in connection with a HECM reverse mortgage loan is for the benefit of your lender and not for you.
When the credit available in a reverse mortgage is not enough to cover outstanding real estate expenses, HUD generally requires lenders to advance their own funds, known as “loan advances” or “corporate advances”, to pay property charges. If not keeping your home in good condition is the basis for your non-compliance, here are some options to consider. In addition, after a reverse mortgage has been granted, the lender may require the borrower to maintain the home through ongoing repairs. Once a specified period of time has elapsed, the mortgage loan can go into what is known as a state of default.
To obtain a reverse mortgage loan from HECM (granted in accordance with the HECM program and Section 280-b of the New York Real Estate Act), the borrower cannot waive counseling requirements, but can choose to request the required advice in person or by phone. New York law and regulations require lenders to disclose a number of facts to anyone who obtains a reverse mortgage loan. Any event that could cause the foreclosure of your reverse mortgage should be listed in your loan documents and as part of the information provided to you by your lender before closing your loan. No state or federal government agency is not involved in reverse mortgage lending granted pursuant to Section 280 or 280-a of the New York Real Estate Act.
The new HUD policy allows a non-borrower spouse to remain in the home as long as the non-borrower spouse continues to occupy the home as their primary residence, is still married and was married at the time the reverse mortgage was issued to the spouse listed in the reverse mortgage. However, problems arise when only one borrower is listed on the reverse mortgage and that person's spouse also lives in the house. If you are in danger of defaulting on your reverse mortgage, you should immediately consult with an experienced local mortgage attorney. That application fee must be designated as such and cannot be a percentage of the principal amount of the reverse mortgage or the amount financed.