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My mother is in a memory care facility on Medicaid since early Nov 2019. My father passed away 13 months ago. They had a home on a reverse mortgage sinice 2009 and it is completely underwater. I sent the amount owed and the current market value to Medicaid showing how underwater this home is. It is in default now. The lender says they will accept a Deed in Lieu of Foreclosure. The lender put a lock on the house and the homeowners insurance was cancelled.

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At this point, Medicaid and the mortgage holder can duke it out. You have no dog in this fight.

your Mom could be held in default on the loans...but....so what. Deed in lieu of foreclosure? Why bother? She isn’t going to be ever in a position to have any assets attached by a lender. She isn’t going to ever need a loan again, so her credit rating is meaningless. Basically, she is totally collection proof. Medicaid can try to collect, but that is between the mortgage holders and Medicaid, not you. I fact, you probably cannot sign off on Medicaid’s lien on the house....but, that is between the mortgage holder and Medicaid.

remember, unless you signed any or these loan documents...you are not liable for any of it.

so, I recommend you write a nice letter to these lenders and explain that there is no way your Mom will ever pay this and she will leave no estate.

if I were you, I would not do anything beyond a letter. I would not hire an attorney. Why throw money out the window. Unless of course, you signed personally for any of these loans.
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Gartra Jan 20, 2020
She is in default. No property insurance and she couldn't pay property taxes. She has no money except for her Social Security. Since she is totally underwater on this house and Medicaid was made aware of it during the application process wouldn't a Deed in Lieu be a much better route since the RM is the primary lien holder? But yet I don't know if Medicaid would immediately disqualify her when they find out. I just want to make sure she stays covered by Medicaid And I want to get this house gone!
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I think u need a lawyer.
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Katie Kate is spot on imho as to how to deal with this.

The RM is secured lending with the property listed & beholden as collateral on the RM. As such it is the superior lien to anything else & controls whatever happens with the property; both physical control - like they locked it up - and all legal control. RM pretty well are designed to have as the end game any & all $ coming from sale of property is theirs. Between balance on RM, fees, interest and whatever else they can tack on (appraisal, locksmith, cleaning crew), it’s gonna be way way more than property is worth.

Medicaid is not a secured debt. What Medicaid might can do (& this very much depends on your states laws on property rights & probate) is either place a predeath lien or after death claim on the estate which has the property as an asset of the estate. Even if yours is a state (TIFRA) that allows a actual predeath lien placed, it’s still unsecured. The lien might be there; it’ll be kinda subterranean and found if a mortgage lender type of title search is done. But it’s a not secured debt. RM doesn’t give a fig about Medicaid.

RM probably wants mom to do a Deed in Lieu as it will make their eventual selling of the house so so so much easier as they get possession sooner and don’t have to go thru the legal requirements of a foreclosure (like the notices in the paper, posting at courthouse, serving the owner, etc.). Foreclosure takes t...I...m...e..... so Unless RM is going to do all the DIL paperwork for mom/you at all their costs including them sending a notary to the NH, and with a bow on it for you, I’m with KK that it’s not your or mom’s problem.

also RM wants DIL done ASAP as they don’t want extra complications should mom die before the RM is able to get all paperwork done.

if you should not already have DPOA that allows for doing full financial and selling of real estate, this will get complicated unless mom is pretty competent. If she’s got dementia and it’s kinda obvious and you don’t have full DPOA, I’d totally have all this as not your problem. Ever.

let us know what happens, thanks!
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As long as your name is not on financial obligations such as medical bills you are not obligated to pay it. Anything that goes into probate, Medicaid can potentially get. With reverse mortgages the bank owns the home after the owner dies, so it is bank's headache...not yours.
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The lender Cannot put a lock on the house if it is still in the process of foreclosure. They do not own it until the foreclosure is finalized and have absolutely no authority to do so. We had the same reverse mortgage situation happen with my mom. My mom had to sign an agreement just to let them come onto the property so they could assess the repairs from the outside. We begged the lender to take the house, but they kept telling us their hands were tied by government red tape. They offered a Deed in Lieu, however one of the demands was that any and all repairs (including the leaking roof that needed replacing) be taken care of and that it be "broom swept" clean before they would even consider it. My mom didn't have the money to fix the problems or keep up the required insurance when she lived there, so we certainly weren't going to go into debt ourselves over it (and our elder care lawyer advised against it). That house sat empty, falling apart for 18 months before the foreclosure was finalized. As far as I know it's been another 16 months and it's still empty - but that's the lender's problem now.
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My parents had a reverse mortgage on their home. After mom died I lived with dad until he died, I notified the bank that he had passed and asked them how long I had to move out or try to sell the home myself. You generally have 90 days to do anything besides let them handle it, however after 90 days you can get another 90 days by requesting an extension. This can happen for a period of one year. While my parents reverse mortgage wasn’t underwater the house did require a great deal of cosmetic work to make it more sellable. Our family didn’t have the money to invest in it, so I remained in the home for a period of six months which was how long it took the bank to get their end in order and put the house up for auction. This enabled the siblings to come and get the things they wanted that had belonged to our parents. Everything else that wasn’t claimed went to charity, the things we were unable to get out were left in the house. As one of the executors of the estate I received a letter from the real estate company handling the house for the bank telling me that items were left and gave me a number to contact if I wanted to get them. All of this is to say that you don’t have to do anything in order to let the bank handle it. If there are things in the house that you want get them before the bank puts it up for auction. Tell Medicare thayour parents have a reverse mortgage on the home. For Medicare purposes I do believe this means your parents don’t own the house and it won’t be counted as an asset.
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jacobsonbob Jan 19, 2020
From the context of what you said in your last two sentences, it's apparent you actually meant MedicAID.
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Straying a bit, but I think that elderly and everyone should know that reverse mortgages are generally a very bad idea and people should be counseled against them or at least know the repercussions.
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Isthisrealyreal Jan 25, 2020
I completely agree.
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A deed in lieu of foreclosure is the simplest, cheapest way to handle the house.

Ask Medicaid how they deal with it and if it doesn't disqualify her from benefits then it would be the generous thing to do. Foreclosure costs thousands of dollars and a deed can be done for a couple of hundred.

Realize that no insurance could cause problems if something were to happen, so the sooner it is transferred the better. It is a good thing to get it out of moms name sooner.
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Also regarding “Medicaid Recovery Rules”, MERP or MERS aka Medicaid Estate Recovery Program / system is an after death process. It deals with how the state or its outside contractor approaches trying to get back $ spent by the state Medicaid program on a now deceased Medicaid recipient from any assets of the deceased estate. How it gets done really in my experience depends on your states administrative rules for Medicaid, property rights and probate laws.

Merp not a issue till after death.
For your mom, this is a current eligibility for Medicaid issue instead.

Why? Cause if they sell / transfer an asset of theirs or get an asset while alive (usually this is cause they inherited $ or property or life insurance proceeds from someone else who died & named them beneficiary), that is an issue for their current Medicaid eligibility. The new $ or new ownership of a property changes their eligibility. They probably won’t be low income enough for how LTC Medicaid works. They become ineligible for Medicaid.
It’s not a MERP issue. Any changes in assets is supposed to be reported to the state in a timely manner. Just what the timeframe is depends on how your state runs it’s MedicAID program. The requirements would have been in the application. Also states can do a annual recertification as to eligibility. Changes have to be reported. State can do a search thru state database to see stuff too. Medicaid runs the new numbers to see if still eligible or need to go to private pay.

They can get suspended from Medicaid if renewal paperwork not submitted or there’s a discrepancy.

if Sissys concerns are kinda last couple of months, I’ll bet that the costs on the house are more than she can afford. Property taxes are due most places by end of January. If moms old homestead exemption was removed by tax assessor cause it’s not exactly her home anymore, it could be a huge, HUGE increase that is due by end of this month. Like $$$ 3x 5x the old tax bill. There’s gotta be something that sparked Sissy on “selling” & “now”. Go on line and look at tax bill and also if it’s been at all delinquent or late for last couple of years.
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I have a basic idea how reversed mortgages work. A lot involved. I do agree, Medicaid will not even consider the house until the person passes. Then a letter will go out asking for info about the house. I would think at that time you will give them all the info concerning the foreclosure. As a child, you do not owe Medicaid anything. If there ends up to be no house, there is no house. If the house sits and rots, it sits and rots. Medicaid can only recoup money if it sells.
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