Many times a senior homeowner will not acknowledge foreclosure notices. They will ignore them believing that no one can put them out of their home. They may have stopped paying their mortgage for a variety of reasons:

• Not enough money from Medicare and Social Security Benefits
• Rising medical costs
• Rising costs of property taxes and homeowners insurance
• Death of the spouse who handled the family finances
• Rising costs of everything from fuel to food
• No understanding of finances

They may have been paying on their mortgage for many years with a small monthly payment, but if they cannot afford to make that payment, they do not fully understand the terms of foreclosure and bankruptcy is something they have been taught to avoid like the plague.

Sometimes, their perception is that they cannot afford to pay “x” dollars per month and they will not ask for help assuming that the notices will stop and they will NEVER be foreclosed upon. They are embarrassed and private about discussing their finances with family, friends and/or financial professionals.

Often, they are original owners who purchased the home for a small percentage of the current value, even in a declining property value marketplace. They often have no clue as to the current market value of the property.

Some, as they are unable to maintain the home especially after the death of a spouse, simply use only part of the house until they are only using a kitchen, bath and one room. Disabilities and illness may require modifications to the home that the senior perceives as unaffordable and/or monumental to accomplish.

Whatever brings them to the brink of foreclosure and/or bankruptcy, the following items work against them to resolve the situation:

• Denial
• Lack of knowledge of possible financial solutions
• Privacy and reluctance to discuss their finances
• Maintaining their independence at all costs
• Mistrust

Once you identify someone facing foreclosure and/or a BK and determine that a Reverse Mortgage solution may be viable but the cash available is insufficient to pay their existing debts and they need cash to close, you can do the following:

• Explain the counseling requirement and provide them with a list of counseling agencies to receive their required counseling face-to-face or by telephone
• Execute the HECM package and submit it
• Obtain conditional approval for the RM
• Supply client with a letter on your letterhead to be included in their hardship request package stating the following:

[Client name] qualifies for a FHA Home Equity Conversion Mortgage (HECM) and has been approved. The cash available is insufficient to cover the existing mortgage pay-off. Therefore the [client name] needs [$ cash required] to close. Due to the extreme hardship, we have reduced our fees as have all of our third party providers in an effort to keep [client name] in their home. We are all working together to help [client name] to remain in their home. To that end, please review the Good Faith Estimate and the Loan Comparison for the details of the proposed reverse mortgage transaction and please consider reducing the mortgage pay-off by [$ cash required to close].

The reverse mortgage is a federally guaranteed program designed for seniors and is often overlooked as a solution to avoid foreclosure/bankruptcy.

Please do not hesitate to contact me with questions regarding this matter. [Provide your contact information]
I thank you in advance for your help.
Sincerely,
[Your name]

Requesting a Short Pay-off

This package is intended to assist those clients whose Reverse Mortgage loans have already been approved but who require cash to close. Your client is asking the existing lender to discount the pay-off citing hardship and supporting the discounted pay-off request with the following support documents:

• FHA Appraisal
• Two (2) recent bank account statements
• Tax returns
• Conditional Reverse Mortgage Approval Document
• Reverse Mortgage Benefit Summary
• Recent Mortgage Statement

Sample Hardship Letter

Bank/Current Mortgage Holder Contact Information
Re: Client Name
Account #

PRIVATE AND CONFIDENTIAL

Hardship Letter
Date
Dear [Loan Modification or Mitigation Contact]:
I began to get alarmed when the value of my home started to plummet. It has gone down in value from my original estimated value of $        to the recently appraised value of $       . Due to foreclosures and short sales in my area, the value is expected to go down even more ongoing. At the same time as home values are going down, the costs of everything else have gone through the roof. My homeowners insurance increases every year as do my property taxes. Living expenses and medical expenses are more and more each month. Although I planned for retirement, I find myself nearly out of money and will soon be unable to afford my monthly expenses no matter how much I do without.
I am approved for a FHA HECM Reverse Mortgage but based on my age and the appraised value of $        , I need approximately $        cash to close. Due to the marketplace, my appraised value will only hold for 3 months and I am nearing the expiration of that time. If I do not do the reverse mortgage now and my value drops even lower in time, I will no longer have the option of taking a reverse mortgage.
Currently, I pay $        per month on my mortgage. I would like to ask you to please allow a short pay-off of my loan with [Lien Holder]. I thank you in advance for working with me through this difficult time.
Regards,

Sample Discounted/Short Pay Agreement

MORTGAGE SERVICE AGREES TO SHORT PAY (RELEASE OF DEED/MORTGAGE ONLY)

Name
Property Address
Account #

To Whom It May Concern:

Mortgage Holder] agrees to release its deed of trust only on the above listed account for a minimum of $_______ due at close of escrow. This offer is contingent upon the sales price of $_______.

Payment must be made in the form of certified funds only and must be accompanied by a copy of the final net settlement work sheet and a copy of the agreement. Any surplus funds from the close of the escrow shall be paid directly to [Current Mortgage Holder]. The realtor’s commission shall not exceed zero percent (%). No proceeds shall go to the seller (Our customer) or buyer. Any excess proceeds shall be forwarded to [Current Mortgage Holder].

Our customer (seller) must acknowledge their agreement to the terms outlined in this letter by their signature at the bottom of this letter. This letter MUST accompany the proceeds check and net settlement worksheet. Failure to do so may result in a delay of any release of lien and voiding of this offer. Offer shall be valid through: ________________.

Please reference the customer’s account number on the check and mail to:

[Current Mortgage Holder Payment Address]
[Current Mortgage Holder] will retain the note on this loan. The customer shall be responsible for any deficiency remaining on the balance. All terms of the original note shall remain in force.

Special notes/conditions:

Signature/Date [Current Mortgage Holder] Representative:_____________________
Name typed/printed [Client] ______________________
I acknowledge by my signature below thatI have read this letter, understand it and agree to its terms. _________________________________________ Date_____________

Obstacles and Challenges

• Getting to the right person and getting them to understand what a reverse mortgage is, what you are trying to accomplish and how the fee structure works is difficult. Most lenders do not even have a term for a discounted or short pay-off except as it regards a sale so you may have to explain it many times. Keep detailed notes detailing date, time of call, contact information, what was submitted. Keep copies of everything.
• Most Lenders require a recent appraisal. Often, borrowers facing foreclosure/bankruptcy may not have sufficient funds to pay for that appraisal. You put yourself at risk to guarantee payment on that appraisal due to the fact that if the discounted pay-off is not granted, you may be stuck with the appraisal cost. A good rule of thumb is to have the client provide at least half the appraisal cost. Speak to the appraiser ahead of time, explain the situation and ask them what is the minimum required to keep them whole on the transaction. They will often work with you to cover their costs and not leave you with a bill to pay.
• Much as you want to help, pursuing a discounted pay-off is time-consuming and often frustrating. Be sure to estimate 3x your usual turn-around time when projecting a closing date.
• Inquire if there is a family attorney, trusted advisor or family member who can assist the senior in this negotiation.
• Instruct your client to call every day once the hardship package has been submitted to the existing lender. Persistence is the key to success.
• Many Lenders will not provide you with a direct line or point person with whom to negotiate and seniors give up when they are routed through a never-ending voicemail system of prompts.
• Try to contact a manager or decision-maker within the Loan Modification/Loss Mitigation department by citing that seniors are a protected class and you are advocating on behalf of your mutual client to avoid foreclosure/bankruptcy and keep them in their home.
• Try to get a direct phone number, direct fax number and e-mail to communicate directly with the decision-maker once you have located who that person is.
• Due to rate and pricing changes, in some cases, once a discounted agreement is made and the loan closes, there is money left over available to the client. You must refund any such proceeds to that Lender.
• Be sure to explain what you are doing to the title company with whom you are working. Ask them to reduce their fees to the bare minimum.
• If repairs are required, be sure to get estimates from licensed contractors as to the costs of repairs and inform all parties that FHA requires a minimum of 150% of the repair costs to be set-aside. Include the 150% repair set-side in your costs and calculations on the GFE.

Marketing Idea to Approach Loan Modification Professionals and Loan Modification/ Loss Mitigation Departments of Banks with whom you may have cultivated a relationship.

Best Practice: When working with a client, you will come across some Loan Modification and Loss Mitigation Representatives. Some of them will be more approachable than others depending upon the Lender they work for and their own professional business ethic.

Once you have helped a client to successfully negotiate a discounted pay-off, best practice is to follow up with that Loan Modification Specialist and/or the Loss Mitigation professional who assisted in getting this accomplished.

Include a personal note thanking them for their efforts and asking them to consider a reverse mortgage solution for those customers who come across their desk that are 62 and older and have at least 50% equity in their homes.

Emphasize that a RM solution is often overlooked and may help keep Seniors out of foreclosure and in their homes. Include 3-6 of your business cards and on the back of each card, hand-write the following:

“Kindly pass this along to a friend.
Thank you.
Your Signature”