Smiley, she may, again MAY, have owned the house outright in the past...... but once she places it on the paperwork for the lending as collateral- like for getting a HELOC or a reverse mortgage - that once fully paid off house is now fully & legally collateral against the lending. The house is “securitized” for the lending. If she does not pay according to the schedule on the lending agreement, the lender can call in the loan.... and that means they can foreclose on it.
That’s it’s a “line of credit” type of lending, actually to me is much more problematic than a fixed figure type of lending. There is not set figure owed. It’s all kinda fuzzy..... like she draws $ 3k now for Christmas gifts and then draws 8k for property taxes due in January 30th type of situation. If she’s not careful it can be HUGE, kinda like credit card debt if you have a big line of credit.
Id be concerned that she was put into doing a HELOC by pressure from a bank officer. Lots of bank group do bonus for these. They sound pretty sweet, they are about you to use your house as equity but it’s all lending that must, MUST, be repaid. It’s not quite the clusterF of reverse mortgage but to me HELOC s are not your friend once you’ve retired. Gearing little old ladies to get a heloc to just have in hand for a rainy day fund to me is pretty predatory. It’s not like she’s still working and has an employment based income. She’s past all that right? Like she’s on SS and maybe (hopefully) another retirement income. Once over a certain age and no longer working, it’s all outflow unless you have had investments done and they are essentially working your $. You don’t want debt once your just on income outflow imho.
so my ? to you is, how did this line of credit get done? if it was kinda predatory, personally I’d create a noise to get it struck or cancelled in full ASAP. If she borrowed against it, then repay that and get the loan fully released and filed as such at the courthouse so no issues on house title for selling it in 2020.
You can't get out of it if she has a loan out against it. It has to be paid. I think u need to talk to the bank and see what ur options are. Be aware, though, if u sell it has to be at market value if she may need Medicaid within the next five years.
In order to sell the home, she will need to show it has a clear title. That HELOC will “cloud” the title and has to be paid off in full in order for the sale to go thru.
Id suggest that you look at the loan paperwork to see who the bank officer was and call them - if you have DPOA- to see what the payoff is and how they handle release of Heloc on sales. If the buyer has the same bank for their mortgage, this actually could be smooth paperwork & funds transfer. Be sure to tell the Realtor that a hELOC exists as it will mean more steps to do the Act of a Sale.
The HELOC cannot be paid until the sale goes through,unless there is extra money which seems doubtful here. It should not affect the title. We just closed on a house in October. As soon as the buyer paid we paid off the loan. It may have been a check to the bank at closing or right after but there was not an issue with the title because of it.
This is the way I understand it, as explained to me by real estate attorneys for whom I worked.
Title is vested in your mother's name; she owns the property. But it is subject to the interest of the bank/lender/company which granted the HELOC and holds the HELOC loan. The property secures the loan.
There are a few ways to "get out" of the HELOC:
1. Pay it off.
2. Sell the property. Title work will show that the HELOC is an encumbrance which must be discharged in order to provide clear title, just like a first mortgage. It will be deducted from the proceeds coming to your mother. So, yes, you can sell the house to pay off the HELOC.
3. Contact the bank and ask for what used to be known as a "workout". I'm not sure what they're called now, but "workout" used to be a kind of nasty term. What it involves is a restructuring of a mortgage, sometimes extending the time for payoff, sometimes including other arrangements.
These were used during real estate downturns, in order to provide mortgagors (buyers) opportunities to remain current on mortgages, but not completely paying them off. My experience was with workouts in commercial lending situations.
4. Worse case scenario is walking away - not making payments, inviting foreclosure, and ruining your mother's credit rating. People who weren't particularly responsible did this, with ruined credit to their detriment.
5. Another real estate downturn option was also drastic: Title holder (your mother) would execute a Deed in Lieu of Foreclosure. This relinquished title to the mortgage (lender) in exchange for not pursuing foreclosure.
I mention it just to bring it into the picture, but it was primarily a commercial mortgage option. The buy got nothing except not having a foreclosure on his/its credit history. This is not anything I would consider in your mother's situation.
Another thing to remember is that your mother is the mortgagor (buyer), not you, so realistically, you have no standing unless you're named as proxy under a DPOA. However, that doesn't preclude you from discussing potential options with the lender.
Another issue - banks don't "take" houses unless foreclosure is instituted; they have no reason to and would prefer to get paid off. And in order to institute foreclosure, specific conditions identified in the Mortgage must be met, i.e., certain periods are established beyond which the mortgagor (buyer) is in default. Certain periods are also established to "cure the default" and bring the mortgage back to current status.
If it is a reverse mortgage, then you are facing a whole different situation.
That’s it’s a “line of credit” type of lending, actually to me is much more problematic than a fixed figure type of lending. There is not set figure owed. It’s all kinda fuzzy..... like she draws $ 3k now for Christmas gifts and then draws 8k for property taxes due in January 30th type of situation. If she’s not careful it can be HUGE, kinda like credit card debt if you have a big line of credit.
Id be concerned that she was put into doing a HELOC by pressure from a bank officer. Lots of bank group do bonus for these. They sound pretty sweet, they are about you to use your house as equity but it’s all lending that must, MUST, be repaid. It’s not quite the clusterF of reverse mortgage but to me HELOC s are not your friend once you’ve retired. Gearing little old ladies to get a heloc to just have in hand for a rainy day fund to me is pretty predatory. It’s not like she’s still working and has an employment based income. She’s past all that right? Like she’s on SS and maybe (hopefully) another retirement income. Once over a certain age and no longer working, it’s all outflow unless you have had investments done and they are essentially working your $. You don’t want debt once your just on income outflow imho.
so my ? to you is, how did this line of credit get done?
if it was kinda predatory, personally I’d create a noise to get it struck or cancelled in full ASAP. If she borrowed against it, then repay that and get the loan fully released and filed as such at the courthouse so no issues on house title for selling it in 2020.
Id suggest that you look at the loan paperwork to see who the bank officer was and call them - if you have DPOA- to see what the payoff is and how they handle release of Heloc on sales. If the buyer has the same bank for their mortgage, this actually could be smooth paperwork & funds transfer. Be sure to tell the Realtor that a hELOC exists as it will mean more steps to do the Act of a Sale.
Title is vested in your mother's name; she owns the property. But it is subject to the interest of the bank/lender/company which granted the HELOC and holds the HELOC loan. The property secures the loan.
There are a few ways to "get out" of the HELOC:
1. Pay it off.
2. Sell the property. Title work will show that the HELOC is an encumbrance which must be discharged in order to provide clear title, just like a first mortgage. It will be deducted from the proceeds coming to your mother. So, yes, you can sell the house to pay off the HELOC.
3. Contact the bank and ask for what used to be known as a "workout". I'm not sure what they're called now, but "workout" used to be a kind of nasty term. What it involves is a restructuring of a mortgage, sometimes extending the time for payoff, sometimes including other arrangements.
These were used during real estate downturns, in order to provide mortgagors (buyers) opportunities to remain current on mortgages, but not completely paying them off. My experience was with workouts in commercial lending situations.
4. Worse case scenario is walking away - not making payments, inviting foreclosure, and ruining your mother's credit rating. People who weren't particularly responsible did this, with ruined credit to their detriment.
5. Another real estate downturn option was also drastic: Title holder (your mother) would execute a Deed in Lieu of Foreclosure. This relinquished title to the mortgage (lender) in exchange for not pursuing foreclosure.
I mention it just to bring it into the picture, but it was primarily a commercial mortgage option. The buy got nothing except not having a foreclosure on his/its credit history. This is not anything I would consider in your mother's situation.
Another thing to remember is that your mother is the mortgagor (buyer), not you, so realistically, you have no standing unless you're named as proxy under a DPOA. However, that doesn't preclude you from discussing potential options with the lender.
Another issue - banks don't "take" houses unless foreclosure is instituted; they have no reason to and would prefer to get paid off. And in order to institute foreclosure, specific conditions identified in the Mortgage must be met, i.e., certain periods are established beyond which the mortgagor (buyer) is in default. Certain periods are also established to "cure the default" and bring the mortgage back to current status.