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My mother recently went into a nursing home possibly on a long-term basis. She owns a home that has a reverse mortgage on it which is two years old. She is on Medicaid.


Once she has been in the nursing home for 12 months and me and my sister sell the house who will get paid first: Medicaid for the cost of the nursing home or the reverse mortgage $28,000 my mother received two years ago? I was told that Medicaid would file a state recovery lien against the house and they would get their money first, then reverse mortgage and if there's any money due after that it would be mine and my sisters responsibility to pay.


It appears we got one heck of a headache to deal with in the next few months.

You are correct that once your mom is absent from the home for 12 months, the reverse mortgage lender must be repaid, typically requiring a sale of the house. Since the loan was secured by the house, the loan is paid back first. Any remaining balance of the sale proceeds--if any--will become an asset of your mother, causing disqualification from Medicaid until that money is either spent down or converted to a form that is non-countable (e.g., pre-paid funeral/burial fund, etc.).
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Reply to K. Gabriel Heiser
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The Reverse Mortgage is SECURED lending and as such must be repaid first & foremost. The 28k may be more due to fees and other closing charges placed onto the RM till a Release of RM happens.

Medicaid is UNSECURED lending (credit cards are unsecured also) and whether or not Medicaid or other unsecured creditor can place a lien on the property is dependent on yours state laws for property rights, especially property w/homestead exemption filed. Some states (TX, FL) do not allow liens placed on homes by unsecured lenders.

Nothing can happen to transfer or sale the property until the mortgage is paid off & a release done and this ability is held by the RM lender. There will be a Release of Deed type of document done from the sale which does this.

I’d suggest you very clearly & carefully review your mom’s RM paperwork. Dealing with the RM does NOT have to be your problem unless you choose to make it so. I’d bet both the RM holder & Medicaid would love, love, love for the DPOA to deal with property upkeep, pay whatever & wade through everything related to the RM & Medicaid on that house as it’s less work for both time & $ for them. But you don’t have to do anything except as DPOA notify the RM of mom’s new address and tell RM if family / heirs plan on purchasing property & securing lending to do so within a set # of days. If it’s a HUD HECM RM - I think - that has to happen within 90 days. For Medicaid it’s disclosing home as an asset for Medicaid application and then if any $ paid to mom at the act of sale / release of RM letting Medicaid know that figure as mom becomes ineligible for Medicaid.

Your mom doesn’t have to wait 12 mos to let RM know; if it’s permanent move to a NH then RM can be notified and RM can be called in by the lender. Also mom can default on the “required” owner responsibility set by terms of the RM..... like she’s responsible for paying property taxes, having it fully insured, having it maintained etc.; IF she defaults on any of these the terms of the RM allow for them to do a foreclosure. foreclosure is very different legal path than selling home.

Please Realize that once Medicaid or Medicaid Pending basically all mom’s monthly income must be paid to the NH as the copay or SOC/ share of cost. So anything paid on property - like taxes- will have to be paid by you or defaulted on. You cannot be easily repaid these costs as it’s moms house / mom’s $ so any $ to you - should Sale of home actually be over RM amount- will considered “gifting” and not allowed by Medicaid rules. Taxes, insurance, maintenance etc could be a tidy sum that you need to totally be willing to pay out of a sense of familial duty without ever expecting to be reimbursed for.

Often family let it flat go to foreclosure as family have no $ or time or interest in dealing with property that they get no benefit from.
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Reply to igloo572
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Sounds as if you need to speak to an elder law/Medicaid knowledgeable attorney.

Unless you personally sign for any of these things, you are not responsible for your moms debt.

PLEASE know, if you are POA or DPOA you sign loads of paperwork, so sign "your name acting on behalf of you moms name DPOA" this makes it as though she signed and not you.

I have found that you must become educated as you are in a stressful situation and people and facilities will set you up to be responsible, how they sleep at night is beyond me.
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Reply to Isthisrealyreal
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That's quite confusing...

Your mother took out a reverse mortgage on a property she owned, and two years later is applying for Medicaid? What happened to the money the RM company loaned her? Is that what you're going to use to pay for her NH fees?

The thing is, that when you take out a secured loan, which is what a reverse mortgage is, the property which secures the loan belongs to the lender - the lender already has a lien on it. So if the RM is not paid back, title to the house passes to the mortgage company; i.e. it no longer belongs to your mother, and Medicaid can't claim it. But what is the market value of the house, do you know? - because the standard procedure is that the property is sold, the lender claims the loan plus interest plus fees, and the balance belongs to the estate - which then would pass to Medicaid.

In any case the good news should be: why should you or your sister care which of these entities takes your mother's property? The one aspect of your question that does seem strange is this opinion that you or your sister could be liable for the mortgage debt. Unless either of you was a co-signatory or a guarantor for the RM, I don't see how.
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Reply to Countrymouse
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Why the 12 months? This is a question for Medicaid when reversed mortgage involved.

This is how it normally works whether already on Medicaid or private pay.
The house has to be sold at Market Value. Once sold, all proceeds are to be used for Moms care. (Once in a home and Medicaid is in the picture or maybe in the future, none of Moms money can go for upkeep on the house, including taxes and no guarantee of reimbursement).

Now if already on Medicaid, Medicaid will stop until you spendown the proceeds. Medicaid does not put a lean on the house till the person has died if it hasn't sold by that time.

If u haven't filed for Medicaid yet, the reverse mortgage needs to be brought up when you list her assets.
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Reply to JoAnn29
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How does any of this become your and your sister's financial reaponsibility?

Did you sign any paperwork stating that you would be responsible for paying mom's nursing home bill?
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Reply to BarbBrooklyn
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Reverse mortgages, called "equity release schemes" over here in the UK, are a mis-selling scandal waiting to happen - and roll on the day, I say. I want every advertisement for them to be forced to call them what they are - secured loans - and forced to show the numbers in 12 point or above:

We lend you 10,000 now.
On the sale of your house, whether or not you live to see it, we will claim the 10,000 plus interest at x% APR as agreed plus fees as agreed. Therefore that 10K will cost you or your estate 16/18/23+ K, and quite honestly you'd better pray you die before you run out of money. Don't thank us! Just doing our job - of making as much profit at as low a risk as possible.

To be fair, that *is* their job. I just wish they weren't allowed to get away with all the smarmy ingratiating here to help you lead your life crap while they're about it.
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Reply to Countrymouse
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DafnaS Aug 2, 2018
I agree about the reverse mortgages. But that's a whole 'nother conversation.
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All of you need stock in Advil!!!

Yes to both.
1. Medicaid is run by the State. They promise that you don't need to worry, they will take care of everything.....then you find out that ALL YOU HAVE DONE is taken a loan out from the State and they want their money back.

Somewhere, sometime someone signed for this and
a. Didn't read the fine print
b. State FAILED to explain EVERYTHING to your Mom (she may not have understood the consequences)
2. The State already has the lien prepared to go. The State will be 1st in line under bankruptcy law

3. I hate those commercials regarding Reverse mortgage. Older people see these celebrities telling them how great a reverse mortgage is for people.
!!!!!NOT!!!!
Once the State gets their money back, the bank is 2nd in line!
4. IF there is anything left, you'll be lucky if you're able to sell the house
WHY?
Generally all of this takes place of course after your Mom passes.
a. Medicaid will place the lien and IF Mom has ANY money ANYWHERE, guess where that goes...3 guesses and 1st 2 don't count!
b. Nothing left....bank repossess the house and take over, become owner, sell it for what they can which is generally property taxes owed.
c. ANYONE can go to the public records, make a bid and now they have a piece of property to rent/lease out or flip/sell
d. You/sisters NOTHING

Yes, all of you have a MIGRAINE to look forward. YOU CANNOT SELL THE HOUSE OR TRANSFER TITLE/DEED IN EITHER CASE. YOUR MOM DOESN'T REALLY OWN THE HOUSE RIGHT NOW

Sorry, I know this is not what you wanted to hear, but Mom took a 2nd mortgage without understanding that is what she did.
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Reply to dkentz72
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rovana Aug 22, 2018
I should hope the state demands to be reimbursed wherever possible for monies it laid out on welfare.  No one is forced onto Medicaid after all.
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You should consult an attorney who specializes in Elder Law. They may have an option you can do that you don't even think of. It will be money well spent. It helped us. Just do research and get one that is reputable. It helps to know instead of guessing. A lot of questions will come up and they can guide you.
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Reply to Labmom
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Reverse mortgages can be a good solution, in LIMITED situations. I saw a husband once suck all the equity from his home, spend it on gifts (probably for his girlfriend), and left his wife with nothing. Of course, HE made out because the housing market declined between the time of the RM and the wife's death, and the house was worth FAR less than he owed. When that happens, the bank is left holding the bag. That's how RM works - it's guaranteed, and they can't come after the family for the deficiency. Somebody won in this situation, and it was the husband (and the girlfriend).

What they are really good for, IMO, is keeping a senior in his/her home with paid supports, instead of (or before) going on to Medicaid. So many times you hear someone say, "I am never going to a nursing home." Fine. Use the home equity to purchase those services, delivered in the home. But don't be surprised if there's nothing left.

If there is another source of funds, it would probably behoove the senior to explore those options first. But either the adult kids don't want to get involved, cannot act as a bank (they could record a mortgage also, secured by the parents' house), or the parents don't want to ask. "I promised myself I would never be a burden to my kids," is also something I hear. So be it. Then the kids are upset when they don't get to inherit all of the house because there's a mortgage on it.
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Reply to mumtothree
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