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Can a bank take your social security check to pay back the balance owed for a reverse mortgage you took out on your home ?

Boston, MA |

my uncle is 95 years old ,and has to leave his home for assisted living ,he took a reverse mortgage out years ago and now owes 340 thousand ,his house is only worth 240 thousand , can the bank or mortgage co. take his social security check to pay the difference ? please help me

Attorney Answers 5

Posted

I'm sorry to hear your uncle is going through a difficult situation. Your uncle may want to consider the option of filing for Bankruptcy, which can protect the assets he does have (such as his social security income) and potentially discharge his obligations, such as a mortgage.

Many bankruptcy attorneys offer free consultations, so I would suggest you start there. Please feel free to contact my office at 617-742-4491 for more information.

My responses to questions on Avvo or other internet sites are never intended as legal advice and must not be relied upon as legal advice. I give legal advice only in the course of an attorney-client relationship. Exchange of information through Avvo does not establish an attorney-client relationship with me or anyone at my firm. That relationship is established only by individual consultation and execution of a written agreement for legal services which I provide to my clients.

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3 comments

Jefferson W. Boone

Jefferson W. Boone

Posted

This advice seems directly contra to the excellent posts by attorneys DiMaria, Golden and Rosenberg. I disagree, as well, assuming that your uncle has no assets other the the underwater house.

Alex R. Hess

Alex R. Hess

Posted

Jeff, taking a broader approach, while the question posited above asks whether they can garnish social security checks for a reverse mortgage, the answer is no since it is a non-recourse loan. However, the reverse mortgage holder would certainly have the ability to foreclose and seize the property after going through the correct foreclosure process. If the arrears on the reverse mortgage are signficant, and his father is unable to cure the arrears, maybe a Chapter 13 Bankruptcy can provide a structured, affordable payment plan needed to keep the home, make affordable payments, and prevent a forecosure. Also, there is a caveat do Attorney DiMaria's answer - an agreed upon order or judgment in family court can allow for garnishment of social security benefits to pay for alimony or spousal support. It also may be safe to assume if his father (in the fact pattern) is behind on his reverse mortgage, he may not be up to date on other bills (of course, we don't know this from the facts). So I think the safe answer here is see an attorney.

Danielle M. Callahan

Danielle M. Callahan

Posted

Attorney Boone, while I typically would appreciate any and all comments to my answer, I would polite suggest you re-read my answer. The question here raised quite a few issues that an attorney may see while an individual may not be aware of. That is why I suggested he speak with an attorney, hopefully in a free consultation, in an effort to best protect his Uncle's entire financial situation, not merely the one concern he thought of.

Posted

No, section 207 of the Social Security Act (42 U.S.C. 407), bars the garnishment (i.e. "taking away") of social security benefits by ANY creditor other than the federal government.

Section 207 states: "The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law."

Very simply stated the Bank cannot touch your uncle's social security check, and so neither you nor he have anything to worry about.

Atty: 845-704-7777. This answer is provided for informational purposes only and does not constitute legal advice. You should not take action based upon this information without consulting legal counsel. This answer is not intended to create, and does not create, an attorney-client relationship. PLEASE REMEMBER: All claims and legal matters have statutes of limitations and/or other important time periods that apply to them. This means that you must take action on all claims or legal matters within the required time period(s) or your claims could be barred by the statute of limitations or dismissed. Contact our office or another competent attorney immediately to discuss the particular facts of any claim or legal issue you might have in order to learn what time periods apply to your particular situation.

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Posted

I'm assuming that your uncle took out the most common reverse mortgage, which is known as a Home Equity Conversion Mortgage (HECM) loan, and am answering the question accordingly.

A reverse mortgage is a "non-recourse" loan, which means that the most the lender can recover is whatever the house may sell for. When your uncle took out the loan, part of the fees went to pay for a government-backed insurance policy for the lender to hold to insure against just such a situation.

I strongly suggest you get a copy of the mortgage and note and have them reviewed by a real estate attorney to confirm what I'm saying. You can find more information about HECM loans here: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten

Good luck.

E. Alexandra "Sasha" Golden is a Massachusetts lawyer. All answers are based on Massachusetts law. All answers are for educational purposes and no attorney-client relationship is formed by providing an answer to a question.

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Posted

Absolutely not. If the reverse mortgage is "under water," they get the full proceeds of sale; that's it. If you happen to be receiving threats or warnings of any kind to that effect from the mortgagor, tell them you want to retain an attorney, then notify the Commonwealth's Office of Consumer Affairs banking division (link below)

Attorney Rosenberg is admitted to practice in Connecticut and Massachusetts, and currently practices in South-Central Connecticut with an emphasis on estate planning, elder law, probate, and tax matters. He may be contacted confidentially by email at Scott@ScottRosenbergLaw.com or by phone at (203) 871-3830. All correspondence through this website appears publicly, is not confidential, and does not create an attorney-client relationship between you and Atty. Rosenberg. Discretion should always be employed when posting personal information online. ~~~~~~~~~~~~~ All online content provided by Atty. Rosenberg on this and other websites is provided for general informational purposes only, and does not constitute legal advice. All content is general in nature. Attorneys are unable to ask the questions necessary to fully understand the legal issues faced by any particular poster. Postings and responses to questions only provide general insights on the topic discussed. They are not tailored to any reader’s specific situation, will not be accurate in all states, and are never updated or maintained to reflect changes in the law. No person should take action based on the information provided by anyone on Avvo.com or any other law-themed website without first consulting a local attorney with significant experience in your area of concern. Persuant to Circular 230, no online content may be used by any person to avoid taxes or penalties under the Internal Revenue Code.

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Posted

I think all of the attorneys here have listed helpful answers, however while your fact pattern focuses on your uncle's social security check, that may not be the biggest issue here. If your uncle is behind on the reverse mortgage payments, the mortgage holder can begin Foreclosure proceedings against him. So, while your social security checks may be safe, his home may not.

I think your uncle should meet with an attorney who can gain a better overall understanding of your uncle's financial situation, what assets and debts he has, and what his options are in terms of protecting the house, or preventing a foreclosure.

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2 comments

E. Alexandra Golden

E. Alexandra Golden

Posted

Mr. Hess -- I take it that you are unfamiliar with how reverse mortgages work. There are no payments which need to be made to the lender. Foreclosure occurs only if the borrower does not keep up with insurance and tax payments, if the borrower dies, or if the borrower leaves the primary residence for at least twelve months.

Alex R. Hess

Alex R. Hess

Posted

Thank you for the comment Attorney Golden. My comment only referenced a foreclosure since it was unclear from the facts provided whether payments were being made to cover the insurance and real estate taxes. I agreed with your comment since I agree with it -and any disagreements here may be over the lack of facts provided, and the fact that the property is underwater.

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