Aging Options Blog : Washington Estate Planning Lawyer & Attorney : Rajiv Nagaich : Aging Options Law Firm : WA Elder Law, Wills & Trusts

How often can banks inspect your property to check the condition and could this be a problem for seniors? Especially considering the maintenance of the grounds?

Generally this is not a problem.  The contract does state that you have to maintain your house. They will usually send somebody on an annual or bi-annual basis to do a drive-by or come by and take a look at your house.  This frequency is established when you take the loan and depending on how the old house is.  When the loan is taken, they will do an initial inspection where someone will come and inspect the house rather thoroughly.  Many times I will see loans subject to conditions that the person who is making the loan made these improvements. At that point they may schedule someone to do follow up and a walk-in. The downside is that they are in the drivers seat as to how frequently to schedule inspections or what repairs must be made.  But it has not been a problem. I have yet to come across a case of absurd requirements.  

In terms of the grounds, it usually does need to be kept in good order, and many times this involves mowing the lawns and people frequently hire others to mow the lawn and do repairs of the grounds.

I do think reverse mortgages are generally a good idea. However, the caution I tend to give people is that they make sure they want and have the means to age in place.  It is not something you should be doing if you are considering moving within the next 3-5 years.

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An original appraisal was given, and the appraised value decreases monthly.  Every month, the banks withdraw from that.  If after 20 years, there is nothing left to withdraw, can I be kicked out of my house?

No. They cannot kick you out. The worst thing that can happen is that they can say you have no more equity that you can access from this house anymore.  As you grow older, the amount of equity, and the percentage you can access grows.  But they can never kick you out of the house so long as you are living there.  This government program was initiated in order to allow seniors to access their home equity without jeopardizing their right to be able to live there.  

The other end of the spectrum is that if you pass away and the value of your house is down. If the amount you have taken out over your lifetime exceeds the value of the house, you will still be covered by PMI insurance.  This protects your children and your family from having to step in and take care of it. 

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Available to people 62 and older, reverse mortgages allow homeowners to convert their home equity into cash. Instead of writing a check to the bank each month, the bank pays the homeowner, who can elect to receive a lump sum, a line of credit or monthly payments. The loan is repaid, with interest, when the borrower dies, moves, sells the house, or fails to pay property taxes or homeowner's insurance.

Reverse-mortgage fraud, typically committed by homeowners' relatives, caretakers or financial advisers, has also been cropping up recently in schemes to unload distressed real estate. Regulators cite cases in which real-estate speculators bought properties on the cheap and then sold them, using inflated appraisals, to senior citizens willing to take out reverse mortgages.

Lenders and administrators of theHUD program say reverse mortgages, for the most part, are still working well. "There are little scams around the edges," says Meg Burns, director of Single Family Program Development for the Federal Housing Administration, the HUD division that administers the reverse-mortgage program. Recent data—and HUD's own inspectors—indicate reverse-mortgage scams are on the rise. So far this fiscal year, which ends Sept. 30, HUD has referred 29 cases of suspected fraud to its Office of Inspector General for investigation, up from two the year before. Jacqueline Felton, who heads the FBI's mortgage-fraud team, says her agency is also seeing an increase. Indeed, HUD's data on suspected fraud likely understates the extent of the problem. Anthony Medici, who in June testified before Congress as a special agent in the OIG's Criminal Investigation division, said current cases "involve hundreds of properties."

Source: Wall St. Journal (27 August 2009)

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