Doreen, what's the update on this? 

I believe that if the homeowner is deceased, they can simply supply a deed in lieu.  However, a deed in lieu is not valid until accepted by the lender.  Some lenders will not accept them, especially if there are other liens or clouds on title.  In the case of a HECM reverse, there is no recourse to the borrower or to the heirs.  LEnder may still have to foreclose or go through the formal short sale process in order to shake off the junior liens, judgments or other possible clouds.   Remember, when you look at public record and see a $300,000 mortgage amount that is not always the actual number in a reverse.  The recorded amount is 1.5 times the actual lending limit.  The lending limit would then be $200,000 and even then the funds may have been disbursed over a number of years.  It could even have been a taken as a credit line and not accessed.  So even though public record shows $300,000  it could be as little as $30,000.   Of course, if you are looking at the monthly statement you will see the number much closer to the payoff amount.  Don't assume the balance is the same as the public record.

Unfortunately, I believe that we will see a number of short sales on reverses.  Even at 60% of the value, the interest accrues steadily.  Certainly, the borrower has no control over when they will pass. HOpefully, the steep mortgage insurance that was paid when they took the loan (2%) will be enough to cover the pool of bad loans.  Well managed, it should be enough to cover. Fortunately, this inverse value relationship should be of relatively short duration.

My condolences.

Wow, I am trying to buy such a house.  The owner is represented by a trustee and my offer is accepted.  The bank has not responded and it has about four months now.  So there may be a problem for me as a buyer and I may have to withdraw my offer.

I'm in the middle or the end of the mess of a reverse mortgage that is in a short sale of around $14,000. The reverse mortgage was taken out for my father in November 2007 and the loan was for 500,000 dollars. We used the reverse mortgage to pay off one small loan--I'm in California--250,000 dollars. My father had dementia, so he had almost 24 hour care for years. I did not put him in a nursing home.  I almost had the sale on the money, but a few things didn't work out. the house was first appraised at 540,000 two months ago. It sold in a week, but taxes on the house when sold in Los Angeles are horrible - $7,000, then there is earthquake retrofit stuff, and other stuff that is unbelievable. It was reappraised at 485,000 and then at 465,000 from the reverse mortgage company. I put on a new roof on the house because of FHA loan rules -- most loans now are FHA. And FHA demands that a roof last at least 2 years. I also restripped the floors and fixed the pool pump. Oh well...

The short sale takes awhile even though a reverse mortgage is a NON RECOURSE loan--the bank can't come after the trust or the family members, so there might be an advantage, but not by much in regards to time. I have already waited 4 weeks and it will probably be longer. One has to remember that many times unless the mortgage is FHA backed, if it is a jumbo loan--over 265,000 dollars--might have been sold just like other banks sold loans to other banks.

The mortgage company makes the money up front on the loan origination and then on the interest on the borrowed money.  There is also a monthly service fee that is added in each month.

Question, can one purchase a condo that is a short sell with a Reverse Mortgage?