Sub 2 And Reverse Mortgage

Hey gang-

I'm going on Monday to see a daughter about her dad's house. He has a reverse mortgage and owes about $68K on the house. I've already got a potential tenant/buyer lined up for this property. Question is, can I do a subject 2 with a reverse mortgage? I know that there are basically three types of RM's but I am wondering "in general" if it is appropriate.

I have to also run the numbers when I get more specifics on the loan to make sure that the appreciation I build into the purchase price outpaces the interest accrual and loan balance, but even if it kept a steady pace I'm still probably looking at about $25K when I cash out, not to mention the income from the Rm AND the tenant/buyer!

Please let me know if I'm missing something here. I'd like to let the Daughter know sooner rather than later if this deal isn't a good idea.

Beth

Comments(12)

  • InActive_Account4th October, 2004

    How in the world would you take a reverse mortgage subto would and why would a seller let you. If they are getting money back why would they give you the house unless you are going to cash them out and that wouldn't be subto. This is confusing. Anyone else have any thoughts??

  • medusa004th October, 2004

    Don't know why, but they seem willing to do it. I think the deal is that since Dad is in a nursing home, they probably just don't want to deal with the property anymore, which as we know makes them a great candidate for a sub2 transaction. In lieu of extra mortgage payments to me, I'll do the needed minor repairs using the income from the rev mort. I think this deal is more workable because of the fact that the bal owed is pretty close to what is owed on the property. I can take the rev mort sub2 by putting it in a land trust.

    Beth

  • ceinvests7th November, 2004

    I hope others respond, because this seems like an area for potential major problems. The newest Fraud?
    Go to www.reversemortgage.org for info.
    "The loan is repaid when you cease to occupy your home as a principal residence, whether you (the last remaining spouse, in cases of couples) pass away, sell the home, or permanently move out. "
    What is this daughter thinking?

  • InActive_Account7th November, 2004

    Far from fraud. They are endorsed by AARP.

    I don't think that they make the best business sense. But not fraud.

  • astcptlmgmnt15th November, 2004

    I believe that the owner has 1 year from vacating the premises before the loan must be satisfied! Problem is that most of these transactions involve some kind of probate hearing, (due to owners death) that can take several months to a year + if complicated. The goos thing about reverse mortgages is that they rarely lend more than 2/3rds of the fair market value of the home, so chances are you are getting a great deal. Also most older people don't tear up the home, you may need to do just minor cosmetics to get property up to snuff!

    Good Luck

  • InActive_Account18th November, 2004

    I also am perplexed on why this person would be willing sub2. Being the skeptic that I am, perhaps the balance on the first is 68K and they have burned up all of the equity? Maybe those good Ole rev. mortgage payments are drying up? Just a thought.

  • ceinvests20th November, 2004

    lacashman,
    Do you mean that reversemortgages are endorsed by AARP? That I know; and HUD now controls them, right?
    I meant fraud in that a family member lets the payments keep coming in to an investor (subject2) after putting elder in a home. That would mean that rather than paying on a purchase, the investor would be being paid and could rent out the house for payment or L/O.
    Is this legit? It looks like it violates the terms of the reverse mortgage and would be ripe for fraud?
    Set me straight...
    Beth, how did this go?

  • medusa0020th November, 2004

    Actually, the daughter called me a few days later and said she wanted to wait on doing this and I haven't heard back from her. I did not pursue it because of the property itself, not nec.b/c of the Rev Mort. As far as stipulations, it seems no different to me than any other sub 2 situation, which banks don't like anyway. If this situation came up again, I'd probably ask them to refi or decline.

    Beth

  • NewKidinTown220th November, 2004

    ceinvests,

    When did HUD take over AARP?

  • jeff1200220th November, 2004

    I believe that he meant that HUD controls the reverse mortgages, Not AARP.

  • ceinvests21st November, 2004

    Thanks, Jeff.
    I was saying/asking if HUD now regulates all of the reverse mortgage offerings; I thought that I had read that, but I know I may be wrong.
    So, I'm curious if anybody thinks that a reverse mortgage could be used for creative financing?

  • NewKidinTown222nd November, 2004

    Quote:I believe that he meant that HUD controls the reverse mortgages, Not AARP.
    jeff12002,

    I figured that out, but that is not the way it read. Just wanted to be sure.

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