Will a Reverse Mortgage Take Her House?

...................

3 November 2003

"My mother has had an FHA Home Equity Conversion Mortgage for some time and has reached her $70,000 credit limit. The lender has sent her a letter saying that they are transferring the account to HUD. She is worried she will lose her home…?"

Not to worry, so long as she is paying her property taxes and doesn’t rent out rooms, her home is safe.

Under HUD rules, a lender can assign a loan to HUD once the total amount owed by the owner – the sum of all payments to her, upfront fees that were financed and accumulated interest -- equals the "maximum claim amount.” This is the largest amount the lender can collect – it is $70,000 in your mother’s case.

On assignment, the lender is paid that amount and HUD becomes the owner. HUD will appoint a servicer to handle the loan, who could be but probably will not be the one your mother has been dealing with. The switch to a new servicer is the only change your mother will notice.