What is a letter of intent with a reverse mortgage? I am asked this a lot as I run a statewide California probate law practice. A person has died, they had a reverse mortgage, and the reverse mortgage company has asked for a letter of intent. What should you do?

First of all it’s important to know that reverse mortgage companies tend to not be flexible and friendly after death. They tend, though not always, to be sort of aggressive in moving toward a foreclosure. Thus, you should treat them with the highest level of respect so you don’t lose the family home!

Second of all it’s important to know reverse mortgages are heavily regulated by HUD and have very strict guidelines and rules they must follow. If you do their part in following the rules they will do their part. That is, don’t play games with them. Notify them of the death and follow their rules!

Third it’s important to remember California Civil Code 2920.7, which I blogged about when it was a brand new law here.  This gives survivors the ability to communicate with the mortgage company which is huge!  Use this law to your advantage to get information about the reverse mortgage if they are not being open with information.

Fourth is the letter of intent is one of the common requests they make of the family after death.  Here is an example letter I helped a client send to her mom’s reverse mortgage company earlier this year.  It was accepted by the company. Of course I changed the name and stuff to make it not personal.

John Dough
1234 Main Street
Fairfield, CA 94533
707-555-1212
dough.john@gmail.com
August 13, 2020

Reverse Mortgage Funding
P.O. Box 40724
Lansing, MI 48901-7924

RE: Letter of Intent – Account #12345678

To Whom It May Concern:

I am the heir of Margorie Dough’s estate and this letter is to document my intent to sell the property at 1234 Main Street, Fairfield, California. This will be done once I have received permission from the court to proceed with the purchase. I have filed a probate petition and am awaiting our court date so letters of administration can issue.

If you have any questions, please contact my attorney, John Palley, of Meissner Joseph Palley & Ruggles, Inc. at 916-920-5983.

Thank you,
John Dough

The letter is not fancy. It’s just playing by their rules.  The most common themes of these letters are:

1. Like above – the estate intends to sell the house;
2. An estate heir wants to buy the house from the estate;
3. An estate heir wants to buy an upside down house by reducing the reverse mortgage to 95% of current fair market value (yes, that’s a law);
4. An estate heir wants to pay the reverse mortgage off (perhaps waiting for life insurance money to come in for example);
5. An estate heir wants to get a loan on the home to pay the reverse mortgage off;

If you have lost a loved one who had a reverse mortgage contact us to discuss next steps. Very likely a probate court appearance is needed to clear title so that you can take one of the above actions.

-John Palley