I recently encountered a couple different properties that were both being sold subject to HUD Guidelines 24CFR206.125. Huh? What does that mean?! The guidelines are stipulations for the sale of reverse mortgage foreclosures. Again, what does that mean?!
First... what is a Reverse Mortgage?
A reserve mortgage is a special type of home loan that lets homeowners 62+ years old who own their home outright or have a low mortgage balance convert a portion of the equity of their home into cash. The cash may be paid out in monthly payments or in a lump sum like an equity line of credit. The homeowner must live in the home and pay real estate taxes, utilities, and homeowners insurance. However, unlike a home equity line of credit, there are no monthly payments and the loan doesn't have to be repaid until the property is sold or is no longer used as a primary residence. There is even a purchase option to allow the purchase of a smaller home and never having a house payment.
Second... what can trigger a Reverse Mortgage Foreclosure?
There are three scenarios that can trigger a foreclosure on a reverse mortgage...
- The party who established the reverse mortgage has died.
- Property taxes and insurance are not paid.
- The owner moves out and it is no longer their primary residence.
Third... what are stipulations in HUD Guidelines 24CFR206.125
Some of the guidelines include...
- Price is not negotiable... property cannot be sold below list price except to an heir, who can purchase for 95% of list price
- No electronic signatures
- No seller contribution to buyer closing costs
- 60 days minimum escrow period
- Property sold in AS IS condition
- Details from HUD