Conservatorships & Reverse Mortgage Loans

The early onset Alzheimer’s diagnosis was a shock. Who would step in as Conservator and where would resources for helping the family member come from? It can be quite the balancing act.

Situation:

Cathy never expected her Aunt Trish would ever have needs. She was always super independent and someone she looked up to. So, when she got in trouble with some late bills and seemed to forget appointments and scheduled lunches, friends and family started to wonder what was happening.

Aunt Trish covered up the problems for quite a while. But, after several incidents during the holidays, Cathy sat down with her to talk it out. Once it was finally determined that she needed help, things had gotten pretty challenging. Her credit was damaged with some past due payments but she had kept up the mortgage and property taxes.

The Money Choices:

Aunt Trish doesn’t want to move and is still functioning well enough to stay in her home. Cathy lives close and can help in the evenings but Aunt Trish needs help in the daytime, when Cathy is at work. She may decide to move in with Aunt Trish or they may look at a memory care community later. For now, they don’t want to make the move until it’s absolutely necessary. The familiar home environment is good for Aunt Trish and she has friends in the neighborhood that check in on her frequently.

The Conservatorship:

Aunt Trish and Cathy anticipated that someday Aunt Trish would not be able to participate in decisions about her living and care due to the Alzheimer’s disease. A Conservatorship was established with Cathy as the Conservator and POA when the time came. Cathy is committed to helping her Aunt, but knows her limitations when it comes to time and financial resources

The Reverse Mortgage Solution:

Aunt Trish owed only $85,000 in a conventional mortgage on her $640,000 valued home. With an FHA Reverse Mortgage loan, Cathy could improve cashflow for Aunt Trish’s care in two ways.

• First by refinancing her current mortgage to a reverse where no monthly payments are required, she will have that $1,152.00 that normally would go to the old lender.
• Second, given Aunt Trish’s age and the value of the home, the Reverse Mortgage calculations also provide for an additional $215,000 line of credit.
• This reverse line of credit can pay for the home care needs until Aunt Trish and Cathy, as her POA, decide it’s time to look at higher level care.

Court Approval:

Kim and Cheryl drafted the loan options to fit Aunt Trish’s circumstances and wrote a summary cover letter for the court that had oversight on the Conservatorship.  They clearly explained the needs, options, process and outcomes.

Once the court Judge signed off on the plan, Kim and Cheryl processed and closed the loan for Cathy on behalf of Aunt Trish.

What Happens if Aunt Trish can no longer be safely cared for in her home?

• If or when the time comes when Aunt Trish needs a higher level of care, Cathy could draw out remaining funds in the line of credit to use as needed to get Aunt Trish established and settled in a care community.
• Then Cathy would turn to selling the home as the loan would become due and payable as Aunt Trish no longer lives there as her primary residence. The lender provides for 6 months to sell the home with the ability to request two additional 3-month extensions if there are extenuating circumstances. The lender/servicer would provide all the details.
• Upon sale, the reverse mortgage loan balance would be paid off and remaining proceeds would go to the Conservatorship bank account for Aunt Trish’s care. The lender does not own the home; the reverse loan is a lien against the equity in the property, just like a conventional loan is a lien against the property.

Surprises in health status are one of the biggest fears people have as they age.  As Cathy says, life can throw us some hard curve balls. She was thankful for the existence of the FHA Insured Reverse Mortgage and thankful to have met Kim Dodge and Cheryl Teigen who were so knowledgeable, organized, respectful, timely and thorough in seeing her and the conservatorship through the Reverse Mortgage process.

What to Do Next:

Learn About Your Options, Be Retirement Ready!