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posted: 3/1/2014 12:01 AM

Reverse mortgage requires home to be sold

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Q. My parents, who passed away in 2013, had a reverse mortgage on our family home. Evidently, they did not pay their property taxes and insurance premiums, so the costs were added to what they owed on the mortgage. The home is not worth the reverse mortgage balance. Is there any way to work with the mortgage company to refinance and get back our family home for less than the balance?

A. Your folks were lucky that was a reverse mortgage. Like any homeowners, they owed property tax bills and insurance premiums. If it had been an ordinary mortgage and they didn't pay, they could have lost the house, perhaps to a tax foreclosure. With that reverse mortgage, the bills were paid for them, so they were able to stay in their home. And the estate -- or you -- won't be required to make up any shortfall when the property is sold.

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I'm not optimistic, but you can always contact the lending institution to see if something can be negotiated. Do let me know what happens.

Q. My husband has been divorced 20 years. We have been married 10 years. His ex-wife's name is on the mortgage of our house. We have made improvements together. If something happened to him, would she be able to walk up and take the house? My husband says he checked it and she could not. Is that so? If not, what is there to do?

A. If his ex's name is on the mortgage, that's no problem. But if her name is on the current deed, then she is still a co-owner. Whether or not she'd inherit the rest when your husband died would depend on the wording of the deed.

A lawyer can tell you where you stand.

Q. My house might be going into foreclosure next month if I can't get a loan modification. The bank is going to auction it off. I'm not sure how that works. Am I still responsible for the difference owed?

A. Yes, foreclosed properties are sold at public auction. If the sale price doesn't cover the debt, the lender may or may not go after you seeking a deficiency judgment. Unfortunately, there's no way I can predict the result. But if they don't, here's something else to worry about:

The IRS considers that if you borrow money and are excused from paying it back, you've had taxable income. When the housing crisis got bad, Congress stepped in, so that forgiven debt on a residential mortgage was not taxed. This provision expired at the end of 2013, and Congress has not yet acted on a resolution to extend it through 2016 (HR 3856).

I'm sure a nonprofit agency around you may have useful advice. In some areas, for example, homeowners or tenants have specific rights after a foreclosure. You can search for a local agency at the website of the National Foundation for Credit Counseling, www.nfcc.org. I recommend doing so immediately. Look for a HUD-approved counselor, even if yours is not an FHA mortgage.

Q. About 30 years ago, my brothers and I bought 12 acres in Arkansas. We pay the taxes every year. We each paid one-third of the purchase price so we would each own one-third of the property. We all lived in Las Vegas. Being young, we had plans to all live in Arkansas some day and retire. For some reason, at the time we just put my oldest brother's name on the deed.

Well, we never made it out of Vegas, and my oldest brother died recently, without a will. Now we don't know what to do. We pay the taxes but we are afraid Arkansas will take the property if they find out he is dead. Can we do something without traveling all the way to Arkansas, like over the phone or mail? We still want the property, but how do we get it in our names?

A. Did you have any written agreement when you bought the land? Did your brother leave a widow? Children? Parents? Who's settling his estate? Do you have evidence (canceled checks?) about the property taxes you've paid all along?

And even if you gave me the answers to all that -- I'm not a lawyer. You may end up needing attorneys both in Nevada and in Arkansas.

Which brings me to yet another question -- what do you think the land is worth? For that one, you can probably get a rough guess by phoning a couple of real estate brokers down there. Then, if you think the property is worth the expense, start with a local lawyer, who will probably end up working with another in Arkansas.

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

© 2014, Creators Syndicate Inc.

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