MS home loan assumption and Medicaid 5 year look back

By the home loan, do you mean for a house that she lived in before she moved to the senior living apartment? Why did the person who assumed the loan get the equity in the house that your mother had built up by living there and presumably paying the mortgage? Was the title to the house changed, or is your mother still on it? Why did your mother give up her house and the value of it to this person?

Talk to an elder care attorney.

To me a couple of different but interwoven issues 1. What happend to the equity? and 2. Understanding or rather a lack of understanding of what assumable loans are.

So if your mom’s home was transferred of its ownership to another person by them doing an assumable mortgage, then your mom should have received almost all of the equity she had in the home (less some of the fees for the process). That equity would be her asset that she would need to spend down in order to qualify for LTC Medicaid. Did that happen?

Your post reads that this didn’t happen, so is that right? If so, then the transfer of property & its title and its existing mortgage looks like your mom GIFTED her home to another person. Buyer assumed her mortgage at whatever very low rate she had it at and buyer kept the equity that was built up from all her payments on the home. If this is it, it’s viewed as gifting of an asset of hers to another which is against LTC Medicaid rules and she has a transfer penalty placed on her eligibility. Penalty amount is roughly based on the amount of gifting divided by your State room&board reimbursement rate to the NH from LTC Medicaid. Like if MS pays a NH $280 a day that’s a $8,400 a mo. If mom’s “equity” was 75K, that places her with an almost 9 month transfer penalty period in which she has to private pay for her stay in a LTC facility.

Is this what’s happening?

If so, why wasn’t your mom paid the equity? Do you know the person who bought her home and assumed her mortgage? Could she have been scammed out of her home?
OR……
did she have other debts or a HELOC or other liens on the home that were paid off from her equity $ in order for the assumable mortgage to be done without any clouds on the house title? If there was something like this, those liens may not have shown up on the property transfer info that the Medicaid caseworker can see when going through the State courthouse filings database. If this is where the $ went, mom or you as her POA need to get that info on the debt(s)that the equity paid off so that the caseworker can document that it was not actually gifting.
OR…..
is the caseworker placing the penalty on the entire value of the home? This will be a harder issue to deal with as assumable loans are not like a regular buy / sell & FMV. Assumable loans can be a way to sell a property that otherwise would fall into foreclosure. Doing an assumable that’s delinquent on mortgage payments is called a “notation” or a notation action. It’s an out of the ordinary way to do a mortgage transfer and its speciality real estate attorney work.

Finding a property that has a mortgage that allows for a legitimate assumable mortgage to be done is fairly unusual as it takes longer to do the paperwork….. it tends to be a VA or USDA mortgage. Mom is in MS, lots of homes with & without farmland that qualify for USDA.

Was mom delinquent in paying mortgage & the “required” like property insurance or taxes? If so it could be the assumable was done instead of her being foreclosed upon. If this was what happened, the “gifting” of FMV wasn’t really done. The caseworkers are not knowledgeable on the more unusual ways to do property transfers or on deal with other less common assets (royalties/mineral rights, undivided interest property ownership, Testamentary Trusts). It’s experienced atty work to handle the communication to/from Medicaid.

But you can do things to make this easier…..Try to unthread everything that happened on the more recent history on the property as it should give you a better ideal of how to deal with getting Medicaid to redo the gifting & FMV determination or if more sadly, mom was scammed. Go thru moms checkbook. Get a copy of all the more recent filings to the property / parcel @ the courthouse. Create a timeline. Good luck!

When did that assumption take place? Did she have a tax exposure due to it? If it was recent in 2025, maybe this is a question for a CPA first?

"What “assumption with equity” really means:

If someone assumed her mortgage and also took her home’s equity (meaning she didn’t receive any cash for the equity she built up), the IRS will still look at this as a sale — because ownership (and the debt) has changed hands.

Even though she didn’t receive money, she's considered to have “realized value” equal to the mortgage balance assumed by the buyer + any other payment or benefit she received.

That total is called her “amount realized.”"

Source: ChatGPT

Otherwise why don't you actually visit or call your Mom's local Medicaid office and ask this question? You will be on hold for a long time, but it will be worth it to get the guidance directly from them:

"in many cases, it is possible to meet with a Medicaid representative in person, though it depends on your state and county. Here’s how it usually works:

1. Local County or State Human Services Office

Each state’s Medicaid program is administered locally. Most states have county social services offices (often called Human Services, Health and Human Services, or DHS offices) where you can meet with a Medicaid caseworker or eligibility specialist.

You can:
- Visit without an appointment (some offices allow walk-ins)
- Schedule an appointment ahead of time
- Bring documents for review or application help

You can find your local office by searching online for:

“Medicaid office near me” or “Human Services [your county/state]”

2. By Appointment Through Your State Medicaid Hotline

Call your state’s Medicaid customer service number (listed on your state’s Medicaid website or on the back of your Medicaid card). Ask for:

- In-person appointments or outreach events
- Locations and office hours
- Language or accessibility assistance"

Source: ChatGPT5

More information would be helpful.

She can’t receive Medicaid, which you qualify for by not having income and assets, until she meets those criteria. The friend who got the free house will have to buy it or move out so it can be sold.