The concept of the 90 day extensions and reverse mortgages in California probate is a common issue we deal with in our office. As you likely know, if you are reading this blog post, a reverse mortgage is a way for a senior to borrow money against the equity in their home and not pay it back until after they have died. These days we typically see arrangements where the money is held by reverse mortgage company, like a line of credit, and the senior can withdraw money up to the total amount of the line of credit. Others get a cash out at the time of the reverse mortgage. The key, for purposes today, is that the reverse mortgage is paid after death.
It’s important to note, but beyond the scope of today’s post, is that due after the first spouse to die or the second? It depends on how the loan is set up so work with your loan company to set this up how you desire and need it to protect your spouse!
Generally speaking after your loved one has died you should notify the reverse mortgage company. I believe honesty is the best policy in life and that includes when dealing with a reverse mortgage. I have had clients suggest they are trying to keep the death a secret from the reverse mortgage company but it is my opinion that is not the right way to go. Besides preferring honesty the other reason I like this approach is because reverse mortgagees have built in protections for the family.
Generally you will be granted an extension of 90 days and can ask for more extensions for a total of one year. So, if you do the paperwork right with the reverse mortgage company, you have up to one year before they will start the foreclosure process. The foreclosure process takes about 4 months minimum and usually longer. So, you should have plenty of time to arrange financing if you want to try to re-fi (pay-off) the mortgage or if you want to sell the home.
The purchase option, allowed by law, allows the family to buy the home for 95% of current appraised value. The re-fi option is another way to come up with money to pay off the reverse mortgage. Whether buying or doing a loan you likely need to run the house through probate unless your loved one set up things before death such as a living trust or joint tenancy deed.
Going through the probate process is what my office does and we would be happy to talk to you. We deal with homes with reverse mortgages very frequently and are accustomed to dealing with these companies. Getting the probate filed fast is particular important when there is any mortgage on a home. Do not delay in filing for probate but especially if there is a reverse mortgage because they can be aggressive!
In conclusion the rules are:
- Be honest with the reverse mortgage company;
- Stay in contact with the reverse mortgage company;
- Start probate as quick as possible!