Sternberg Law Group


How to Stop a Reverse Mortgage Foreclosure in California

23 May 2024 | Mortgage

A reverse mortgage can be a great way for California homeowners 62 and older to tap into the equity they’ve built up in their homes. But if not managed carefully, a reverse mortgage can potentially lead to foreclosure. If you or a loved one is facing a reverse mortgage foreclosure in California, there are steps you can take to try to stop it. Here’s a comprehensive guide on how to stop a reverse mortgage foreclosure in California.

Table of Contents

  1. Understanding Reverse Mortgage Foreclosure in California
  2. Communicate with Your Lender
  3. HUD Counseling
  4. Refinancing the Loan
  5. Selling the Home
  6. Non-Profit Assistance
  7. Seeking Legal Advice

1. Understanding Reverse Mortgage Foreclosure in California

Before we dive into how to stop a reverse mortgage foreclosure in California, it’s essential to understand what can cause a reverse mortgage to go into foreclosure. Unlike a traditional mortgage, where the borrower makes monthly payments to the lender, in a reverse mortgage, the lender makes payments to the borrower. However, the borrower is still responsible for paying property taxes and insurance on the home. Failure to pay these expenses can result in default and foreclosure. Additionally, if the borrower moves out of the home permanently (for example, into a nursing home), the loan becomes due and payable, which can also lead to foreclosure if not addressed. California law provides some protections for borrowers facing foreclosure, but it’s still crucial to act quickly if you’re at risk of default.

2. Communicate with Your Lender

If you’re having trouble making payments or know you’ll be unable to fulfill one of the loan obligations, the first step is to communicate with your lender. They may be willing to work with you to find a solution, such as a temporary reduction in payments or entering into a repayment plan for any amounts you’re behind on. Don’t ignore their calls and letters – reach out to them proactively to discuss your options. Under California law, your lender is required to try to contact you by phone or in person to assess your financial situation and explore options to avoid foreclosure before they can initiate foreclosure proceedings.

3. HUD Counseling

The Department of Housing and Urban Development (HUD) offers free counseling for homeowners with reverse mortgages who are struggling. A HUD counselor can review your financial situation, explain your options, and help you develop a plan to avoid foreclosure. They can also communicate with your lender on your behalf. To find a HUD counselor in your area, visit their website. California has many HUD-approved counseling agencies throughout the state, so you should be able to find one conveniently located near you.

4. Refinancing the Loan

If you have enough equity remaining in your home, refinancing the reverse mortgage may be an option. This involves taking out a new reverse mortgage to pay off the existing one. You’ll need to have accumulated enough equity since taking out the original loan to cover the existing balance plus closing costs. Refinancing may provide better terms, such as a lower interest rate, which can reduce your monthly payments and make it easier to keep the loan in good standing. Keep in mind that California has specific laws regarding refinancing a reverse mortgage, so be sure to work with a lender who is familiar with these regulations.

5. Selling the Home

If none of the above options are feasible, selling the home may be the best course of action. This will allow you to pay off the reverse mortgage balance and avoid foreclosure. You can try selling the home yourself or work with a real estate agent. Keep in mind that you’ll need to pay off the loan balance in full when the home sells, so be sure to factor that into your asking price. California law gives you a certain amount of time to sell the home and pay off the loan after a notice of default has been filed by your lender, so don’t delay if you decide this is your best option.

6. Non-Profit Assistance

There are non-profit organizations that provide assistance to homeowners facing foreclosure, including those with reverse mortgages. The National Foundation for Credit Counseling is one such organization that offers counseling and may have programs to help with back taxes and insurance. They can also work with your lender to try to come to a resolution. California has many NFCC member agencies throughout the state that provide foreclosure prevention counseling.

If you’re still unable to come to a resolution with your lender after exploring the above options, it may be beneficial to seek legal advice. An attorney specializing in foreclosure prevention can review your case and provide guidance on your rights under California law and any additional options you may have. They can also represent you in negotiations with your lender or in court if foreclosure proceedings have begun. Don’t hesitate to seek legal help if you feel your lender is not acting in good faith or you’re not sure of the best steps to take to save your home.

Remember, foreclosure should be a last resort. With the right guidance and proactive steps, it’s often possible to avoid foreclosure and stay in your home. Don’t wait until it’s too late – if you’re struggling with your reverse mortgage, reach out to a HUD counselor or other advisor today to explore your options. California law provides many protections for homeowners, but you need to take action to take advantage of them.