Reverse mortgages. Mom is dead, what happens to the mortgage?

Reverse mortgage payable when owner dies.

It's a common question- what happens when the  borrower dies?  The general rule is that the  death of the borrower accelerates the due date of the loan.  The loan must be satisfied through either a mortgage refinance or sale of the property.  Practically speaking, if the estate or its heirs do not want to keep the house, it will be listed for sale and the mortgage paid off at closing when title is transferred.

Here's how the question was posed in a recent column on NJMoneyHelp.com:

Q. I just found out my mother put a reverse mortgage on her house. I live with her. Would I have to move out if she dies? She is the only person on the deed and I’m her only beneficiary.
— Helping out

A. We’re glad you found out about the reverse mortgage so you can understand the consequences.

Keep in mind that each reverse mortgage is different, but we can give you a general idea of how they work.

A reverse mortgage can be taken out in a lump sum or your mom could have decided to receive monthly payouts, said Steven Gallo, a certified public accountant and personal financial specialist with U.S. Financial Services in Fairfield.

“Either way, the mortgage company will have a first lien on the property for the amount it has given your mother plus accrued interest,” Gallo said.

Upon your mother’s passing, the mortgage becomes due and you would have to pay off the mortgage if you decided that you wanted to keep the house,” Gallo said. “You would need to take out a new mortgage in your name for the amount owed or come up with the cash from some other source.”

Most reverse mortgages are due within 30 days of the death of the borrower, but 90 day extensions may be granted, Gallo said.

If you are unable to pay off the mortgage, you would have to sell the home and pay off the reverse mortgage balance, Gallo said. Any remaining proceeds would be yours to keep.

“You would not be able to stay in the house without paying off the reverse mortgage,” Gallo said.

We recommend you review the legal documents for the mortgage so you can see exactly what your mother agreed to when she signed the documents.

Any  questions?  Give us a call.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Virtual real estate closings - not really

Real Estate Transactions Go Virtual

The traditional real estate closings with a room full of people and stacks of documents are becoming a memory, as much of the process is now online.

The above is the heading of an article in The New York Times.  Some quotes:

Real estate transactions have gone largely digital as the pandemic has disrupted nearly every aspect of home buying, from house hunting to securing a mortgage, getting an appraisal, notarizing documents and signing the final closing documents.

Well, not so fast, pardner.  This is an oversimplification of the entire closing process.  First of all, we have to define what is truly digital.  In New Jersey, contracts have been signed digitally for several years. The column recognizes that but it's a fact that we cannot transfer title to a home or mortgage property without ink signatures.

An appraisal?  Well, lenders have ordered them remotely for years, and email just makes it easier for the  appraiser to deliver her final product.  Is that revolutionary?  I don't think so.

Notarizing of documents is done is some jurisdictions remotely, but the pitfalls are obvious to anyone who is trying to protect their property rights.

While some clients continue to prefer in-person closings, others are giving their lawyers power of attorney to sign the final documents for them or they’re executing closings on virtual platforms like DocuSign.

It is becoming quite common for sellers to sign their documents ahead of time and deliver them to a third party, usually a title insurance agent such as Vested Land Services, to be held until the buyer completes the mortgage and her loan funds.  While it's true that many seller's give their attorney a "power of attorney," we recommend that it be expressly limited to signing off on the closing statement and miscellaneous documents that may be required by the buyer's mortgage company.

By all means, read the complete article here.

Your comments are always welcome.

 

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Privately obtained flood insurance in the works?

The Federal Housing Administration (FHA) has published a proposed rule on its website that would allow a private flood insurance option instead of insurance through the National Flood Insurance Program (NFIP), when flood insurance is required by FHA.

In September, the White House signed a resolution that included an extension for the NFIP until September 30, 2021.

The changes would allow lenders to begin accepting private flood insurance policies for single-family insured loans for homes located in Federal Emergency Management Agency-designated Special Flood Hazard Areas (SFHAs), consistent with similar provisions in use by other industry participants.

“Our proposal would expand the options for obtaining flood insurance, rather than continuing to lock in borrowers to one federal option without any ability to comparison shop,” said Assistant Secretary for Housing and Federal Housing Commissioner Dana Wade. “We are also proposing important safeguards that will help protect borrowers, so their homes will have flood insurance coverage at a level at or above the level available through the National Flood Insurance Program.”

Wikimedia Commons

The FHA also is seeking public comment on a proposal to institute a compliance aid for private flood insurance policies. According to an FHA press release, this would allow lenders to rely on the compliance aid to determine if a private flood insurance policy meets FHA’s requirements.

The FHA said it anticipates between 3-5% of FHA borrowers could obtain a private flood insurance policy for their FHA-insured mortgage if this option becomes available.

"This proposal will remove yet another unnecessary regulatory barrier to doing business with FHA and can also reduce costs to the federal government—costs that are ultimately born by the taxpayer,” said Deputy Assistant Secretary for Single Family Housing Joe Gormley. “Allowing participation by private insurers should generate the competition needed to ultimately reduce costs for consumers.”

The proposed rule will be published in the Federal Register in the coming days and will allow a 60-day public comment period following such publication. Comments should be submitted to FHA only through the methods specified in the notice to be published in the Federal Register.

The FHA added that this is only a proposal; "current flood insurance policies remain unchanged at this time, including the requirement that minimum flood insurance be obtained through the NFIP."

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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The NJ Senior Freeze can save you money

Senior Freeze (Property Tax Reimbursement) Program)

This New Jersey tax reduction program works but you have to apply

New Jersey residents may not be aware of the Property Tax Reimbursement Program, also known as the “Senior Freeze” program: a state program that reimburses eligible senior citizens for property tax increases on their primary residence. Once a household applies for the “Senior Freeze,” their future property taxes are “frozen” at their current level for all future years in which they meet the requirements.

Normally, this “freeze” works by issuing annual reimbursements to program participants, paying back the difference between their “frozen” property tax level and the increased amount they actually paid. Unfortunately, due to the coronavirus and the pending state budget, there may be some changes to the program’s funding this year, reducing or eliminating the reimbursement amount for 2020 only.

In the meantime, residents can still apply to “freeze” their property taxes at their current level, rather than waiting another year and allowing your taxes to increase in 2021. Applicants might not receive a reimbursement for this year’s Senior Freeze, but accepted applicants will pay less in taxes next year, and for all subsequent years that they qualify.

Applicants must meet the following eligibility requirements to qualify for the Senior Freeze:

•  You or your spouse/civil union partner were 65 or older on December 31, 2018 or were receiving federal Social Security disability benefit payments on or before December 31, 2018
• You have lived in New Jersey continuously since December 31, 2008, or earlier, as either a homeowner or a renter.

Homeowners Only:     

•       You owned and lived in your home since December 31, 2015, or earlier (and you still owned and lived in that home on December 31, 2019.
•       The 2018 property taxes due on your home must have been paid by June 1, 2019, and the 2019 property taxes must be paid by June 1, 2020.

 Mobile Home Owners Only:

•  You leased a site in a mobile home park where you placed a manufactured or mobile home that you owned since December 31, 2015, or earlier (and still lived in that home/leased the site on December 31, 2019).
• Your site fees must have been paid by December 31 of each year respectively.

 Additionally, applicants must meet the following income limits:

•  Your total annual income (combined if you were married or in a civil union and lived in the same home) was:
• 2018 – $89,013 or less; and
• 2019 – $91,505 or less

 You are not eligible for a reimbursement on:

• A vacation home or second home;
• Property that you rent to someone else;
• Property that consists of more than four units; or
• Property with four units or less that contains more than one commercial unit.
• Are completely exempt from paying property taxes on your home; or
• Made P.I.L.O.T. (Payments-in-Lieu-of-Tax) payments to your municipality.

Life Estate (Life Tenancy). You are considered the owner of the property if you have life estate rights or hold a lease for 99 years or more. You must include with your application a copy of an official document (e.g., deed, lease) establishing your right to occupy the property.

For more information and to apply on line, visit New Jersey’s Senior Freeze website at https://www.state.nj.us/treasury/taxation/ptr/index.shtml

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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The Tax Sale Certificate - Real Estate Tax Liens in New Jersey

Some basics of Tax Sales and Tax Sale Certificates in New Jersey

New Jersey homeowners should know this about their real estate taxes.

All owners of real property are required to pay both property taxes and any other municipal charges. In New Jersey, property taxes are a continuous lien on the real estate in the full annual amount as of the 1st of the year.  But taxes are payable in four installments on February 1, May 1, August 1, and November 1.  Municipal liens for real estate taxes and other assessments are paramount to all prior and subsequent liens, except for subsequent municipal liens.

When taxes remain unpaid, the municipality has a right to “sell” the unpaid taxes.  When that happens, the municipality issues a Tax Sale Certificate.

Why Tax Sale Certificates?

Real estate taxes are the key part of every municipal budget.  When taxes go unpaid, the municipality – that includes you, the property owner – lose that money. The budget suffers and municipal services are at risk. In order for municipalities to collect missing tax money, they are allowed by state law to sell or assign the unpaid taxes.  This is done through a “tax sale” and the issuance of a tax sale certificate.

 New Jersey law requires all 565 municipalities to hold at least one tax sale per year. How does it work?

Prior to actually conducting the sale, the tax collector mails notices of delinquent taxes to the property owner.  The collector also publishes the list of unpaid taxes in local newspapers several times.  If the taxes are not paid, the tax sale is conducted by the tax collector.  It’s a public process.

Third parties bid on the tax sale certificate (let’s call it the “TSC”). At the auction, bidders bid DOWN the interest rate that will be paid by the owner for continuing interest on the certificate amount. If the interest is bid down to 0%, a “premium” is bid up until the bidding stops, to obtain the tax sale certificate.

At the conclusion of the sale, the highest bidder pays the outstanding taxes and becomes the holder of the lien which is represented by a TSC issued by the municipality. The TSC will then be recorded with the County Clerk to establish the lien against the real estate.

If no one bids on the tax lien, the municipality becomes the owner of the TSC.

Typical form of Tax Sale Certificate

Despite the language of the TSC, the holder of a TSC does not own the property. Rather, the TSC holder owns a lien against the property in the amount paid for the TSC plus interest which continues to accrue.

As owner, you have the right to redeem the TSC.  It is strictly governed by statute.  In addition to the owner,  only certain enumerated persons or parties with interests in a property may redeem the TSC. They include the owners, trustees for the owners, heirs of the owners, holder of any prior tax sale certificates, mortgagees and any legal occupant.

The amount required to redeem must be requested from the tax collector who relies on a certification of the TSC holder as to all amounts due and owing. Once the amount is paid, the Certificate should be cancelled of record.

Note, the foregoing is not intended to be an exhaustive treatment of real estate tax liens and tax sale certificates.  Always seek competent legal advice when you are dealing with a tax sale certificate,

 We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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