"You won’t really know unless you ask."
The popular phrase has been used often in many households — especially when kids seek an answer for being left off a team, when wage earners wonder about a possible salary increase, or if carpool drivers can shift to a different day.
The question can also spark critical conversations in senior households when times are tough and cash is tight. For example, will a lender with a second mortgage on a property "subordinate" its position so that a Puget Sound, Wash., couple could obtain a reverse mortgage, avoid foreclosure, and remain in the home they built 40 years ago?
While there is still no hard data to show the number of reverse mortgages that are helping seniors avoid foreclosure, recent local examples continue to support other national anecdotal evidence.
The local case involved an 81-year-old couple who took out a second mortgage two years ago to help their daughter buy a home. The daughter agreed to make the payments on the loan. Unfortunately, she lost her job and was no longer able to make the monthly payments. As a result, the homeowner became delinquent on both their first mortgage and their second mortgage. They subsequently received a notice of foreclosure on their first mortgage.
"The couple inquired about a reverse mortgage," said Sara Hulbert, chief executive officer for Senior Financial Corp., a reverse-mortgage specialist. "But the only way we could get it to work was to have the lender with the second mortgage agree to work with us."
While it is rare for a lender with a second lien on a property to agree to "remain in second place" by allowing a new loan — especially a reverse mortgage — to take over the first lien position, the couple had been long-time customers and needed the help to make the deal work.
Here’s how the reverse mortgage solved the dilemma: The couples’ home value was $235,000 and encumbered by a first mortgage in the amount of $140,000 and a second mortgage of $60,000.
After fees, the couple was eligible for a reverse mortgage of $171,000. When the reverse mortgage closed, the first mortgage was paid off and the remaining $31,000 brought the second mortgage current and also bought down a significant portion of the balance. …CONTINUED