Let me define "Legal Foreclosure" - it is when a maturity event has occurred such as the death of
the borrower. AND, the Servicer has (1) informed the consumer of their rights and options (2)
worked with the consumer to exercise their rights and options (3) together with the consumer
determine the consumer is unable to exercise any option to avoid foreclosure (such as selling or
purchasing the property).
"Wrongful Foreclosure" is more common and happens in many ways. See the list of Servicer
Violations on the Servicing page. Basically, if the Servicer refuses to let you exercise your rights,
violates your rights, fails to inform you of programs available to correct the default, or makes a
false assertion such as the Borrower doesn't occupy the property when they do, accelerates
foreclosure - this constitutes a wrongful foreclosure.
Foreclosure is a very scary process. When the consumer doesn't understand the terms of the
reverse mortgage to begin with or what their rights and options they feel helpless to stop the
There are 17 reasons a Servicer can foreclose. The number 1 reason is the death of the
borrower, followed by failure to pay property taxes, insurance or HOA fees, Non-Occupancy, or
failure to maintain the property. These are some of the legal reasons a Servicer can foreclose if
they are true. Example: You moved to a long term care facility and don't occupy the property as
your primary residence for 12 consecutive months. The lender has the right to foreclose but
must first contact you or your representative to tell you your rights and options to avoid
Here are your basic rights when a loan is called due and payable due to the death of the
borrower: Per 24 CFR 206.125 the heir has the right to repay the loan through sale or purchase
of the property for 95% of the current appraised value or payoff of the loan balance whichever is
less. You can have an initial 6 months grace period with the submission of a will (probated or
un-probated, a Trust, court order, affidavit of heirship. You are entitled to 2 90 day extensions if
you show you have legal authority, and either loan preapproval or a listing agreement. Meeting
these requirements provides 1 year from the death of the borrower to satisfy the loan. The
Servicer is required to do a full (interior/exterior) HUD appraisal to determine the 95% value. The
Servicer bills HUD for the appraisal and is reimbursed. The Servicer cannot charge you for a
exterior only (drive by appraisal) or the 1st required HUD appraisal. Appraisals are good for 120
Regarding a Deed in Lieu of foreclosure. This is only a good idea if the borrower is still living
and/or the heir has legal authority to convey title. If there is any cost involved to probate or get
legal authority there is no point. Just let the Servicer foreclose. If it's in foreclosure you can stop
paying taxes, insurance and other property charges if the property is going to be vacant. Any
questions please ask for more information.
No matter what the reason for foreclosure you as the consumer have rights and options. The
Servicer should advise you of your rights and options but usually doesn't. Most consumers will
get a "due and payable" that says the entire loan balance is due and must be paid within 30
days or the lender will foreclose.
If you are in foreclosure or you feel the Servicer is violating your rights call
for a free assessment and learn your rights and options.
LEGAL FORECLOSURE VS WRONGFUL FORECLOSURE