But she still loses that monthly income, unless you’re proposing that the bank continues paying it to her since they did, after all, get the value of the property, and she is still alive.
Of course it can be sold. A mortgage on a property does not prevent a sale, although the lending institution has considerable say in the price – and can hold up the transaction – if the sale price is below the mortgage balance.
What monthly income? She’s already been paid everything she’s going to be paid out of the value of the house, allegedly.
I don’t see where that was indicated. If she was to receive a monthly stipend, that was independent of the balance due on the loan or the original amount (unless the loan document said otherwise).
Malthus, sorry if I misinterpreted your posts as wanting the state to pay off her loan. I think I was confused with Billfish’s post #31, where he did seem to want that. I can’t find one you made with a similar sentiment. Still, it might take some court cases to define the limits of what the government can do to help, and there has to be some limit, somewhere.
The deal the lady made with the bank is she got $260k and put her house up for collateral. This wasn’t a purchase mortgage, so she must have done something else with the $260k. Blew it on hookers and blow or something else. Now her house has been condemned and it’s market value is significantly less than what the bank lent her. I have a hard time having much sympathy here. As the normal purpose of these types of loans are how you described. If that were the case she wouldn’t have owed $260 to the bank. It would have been substantially less.
Somehow I was under the impression that a reverse mortgage involved monthly payments to the homeowner, in exchange for which the bank gets the property upon death. Maybe that’s the case in some of these deals, but yeah, the article doesn’t indicate that in this case there are any such payments.
Okay. I was under the impression that it couldn’t be. That the bank essentially “owned” the property.
The article states she owes the bank “… close to $260,000”. Property is assessed at $286,910 for tax purposes. Though the article doesn’t say how the bank was paying her out (and it could be in any one of a number of ways), seems reasonable to assume she’d been paid everything she was going to be paid.
Fair enough.
In this case, the lady is in her late 80s. Paying rent on a place for her life - realistically, how much is that likely going to cost the state? 
It can be sold and that sale would trigger the bank’s rights to realize on its security. But the lady is unlikely to willingly sell it in these circumstances.
Please read my post #24. If that doesn’t explain it, please ask and maybe I can answer your question.
And don’t feel bad. There seems to be a lot of misinformation out there about this particular kind of debt instrument.
The article says the lady receives $740 per month, but doesn’t give the source. It is probably Social Security, but it could be from the reverse mortage.
The problem is the government says it is worth $100,000 more when it comes to tax computation than when they have to buy it. Funny, it’s in their favor to do it that way, isn’t it?
If it wasn’t a monthly payment till you die thing but here is X number of dollars then on principle I would still say the Bank owes her a comparable place to live rent free.
The problem here is the “place to live for life” part. Even if she were to get from the state exactly what she’ll owe the bank, and thus have no debt, she’s still lost out on that part of it. Presumably, whatever amount the bank originally gave her was reduced by X dollars in exchange for lifetime residence. So she’s being shafted out of that X dollars.
It seems like she should be compensated for that somehow but I can’t figure out who owes it to her.
Ethically, I’d say maybe it’s Intel, but there’s no legal basis for that.
Where do you guys get that reverse mortgages are some sort of promise of housing for life? It’s a financial contract, allowing individuals to monetize the equity in their homes, and using their homes as collateral for the loan. There’s no promise of sustained value of the collateral, for the bank or borrower.
I’m sure there are numerous examples where people that owned homes collateralizing a reverse mortgage, had their homes burn down. The insurance proceeds go to payoff the loan and if there’s nothing left over after paying the bank, the owner has to start over. The bank or the insurance company is not going to provide a home to the owner in this situation.
Actually, many (most?) home insurance policies will not pay for the home if it isn’t rebuilt. They’ll pay the site clean up (in the policies I’ve seen, that is about 25% of the home value) and that is it. There really isn’t the ‘burning down the house for the money’ any more.
I don’t think it is ethically Intel’s obligation, but it would be a great PR move.
With home prices likely to rise (giving the development associated to their expansion), buying a house, giving her a life-estate, then selling it in 5, 10 or 15 years, they’d probably come out at least at a break even for their expenses and the cost of the house.
As stated upthread, there are two sorts of “value” in having a house:
(1) the financial value of the property; and
(2) the “value” of having a place to live in.
The reverse mortgage is designed to allow a home-owner to obtain money against (1) while not risking (2). There are no payments to make (until the home-oner triggers the realization by the bank on its security by selling the house or dying).
The attractions of this are obvious - the home-owner can have his or her cake and eat it, too – but only for their life. That’s why such mortgages are only availabke to (reasonably) elderly folks. The bank is banking on the home owner dying so that they can eventually realize on their security (a reasonable assumption!).
It isn’t a promise of “housing for life”, but it is a promise that the deal itself will not put value (2) at risk. Forcing a sale does that, though.
If a house burns down, the bank would not be entitled to realize on its security (unless the contract specifically deals with that). The bank can realize on its security if the owner (a) sells the house or (b) dies.
Why would the bank get the insurance proceeds in your scenario? The owner has neither sold nor died (unless they die in the fire, in which case where they are going to live is irrelevant). Rather, the insurance should go towards replacing the house - keeping the deal going in the same form as before.
Because that’s how it’s written in the contract. The homeowner can stay in the home until he/she dies or can no longer sustain him/herself in it, or voluntarily moves. Then the mortgagor gives the owner a year to pay up or sell it, and I understand there is some leeway in hardship cases.
At least that’s the way in one case I am aware of. Others might have different arrangements.
The whole idea of a reverse mortgage is to allow aging (>62) homeowner(s) to stay in their home as long as possible, even if their assets are the only the home and little else.
It would be a major oversight on the part of the lender to have a contract like that. Basically, you’re saying that if the object of the contract (the house) disappears, the lender is obligated to provide housing until the home owner’s death?
It would make more sense that if the house disappeared, the contract would be called and they would move into termination procedures to settle up debts. My basic mortgage has a force majeure clause that states how the contract would be closed out. I’d imagine a reverse mortgage, if it had a force majeure clause, would treat it as a sale of the property and trigger a requirement to redeem the debt.
While I sympathize with her plight, I fail to see how any of this is the bank’s fault.
I think the real problem here is that reverse mortgages have not been around long enough to work out the bugs for special situations like this (or perhaps there’s something in the fine print that hasn’t been discovered yet that governs).
I don’t know the fine print of her contract, so I can’t say.
All I can say is *the intent *of a reverse mortgage is to allow a homeowner to remain in his/her home as long as practical. It’s not the intent of the bank to screw anyone out of their property. Either of these goals might not be met in an imperfect world.
I was thinking the same thing. They are relatively new. They are also much more common than they used to be. AND, then there is the whole significant decrease of house values pretty much across the board.
Then throw in the whole “eminent domain whoda worried about that?” aspect.
So, its a series of rather new/unusual conditions that finally came together to cause a moral, if not techically legal, quandary.
Nobody has done anything wrong, but no matter how you slice it, somebody is gonna get screwed.