Reverse Mortgage Question
Ask the Real Estate Lawyer: Real Estate Law Q&A
By Ilyce R. Glink and Samuel J. Tamkin
Summary: What is a reverse mortgage? Does a reverse mortgage potentially make a lender vulnerable to unlawful activity that occurs on a property?
Q: If a senior owns her home and has a reverse mortgage on it, can her lender be held responsible, as well as the homeowner, for unlawful activity that is occurring at the home?
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There is a lot of criminal activity going on in a particular home in my neighborhood. Can a neighbor name the lender as well as owner in a lawsuit?
A: When a mortgage lender loans money to a homeowner, the lender has a lien on the property. The document creating the lien is usually called a mortgage. In your question, the mortgage is a reverse mortgage.
The difference between a regular loan and a reverse loan is that in a regular loan all of the proceeds are usually given to the homeowner at the time the loan is taken out and the homeowner pays back the loan over time. In a reverse loan, the lender may pay the homeowner over time and the lender is repaid when the home is sold.
If there is criminal activity going on in a home, the homeowner bears great risk whether or not he or she knows what is going on. There are certain laws that allow for the forfeiture of property if the property was used in the commission of a crime.
If a person used a car or home to commit a crime, that person could lose the car or home as a penalty for the crime. The lender’s lien should still be valid and if the car or home is sold off, the lender would receive whatever proceeds were received from the sale of the home. A mortgage lender is usually never held responsible for the acts occurring in a home against which the lender has a lien.
While your question doesn’t include any details of the alleged criminal activity, if the lender is a relative of the owner and the relative takes part in the criminal activity, the lender will most likely become part of any litigation affecting the home
By the way, if there are criminal activities going on inside the house, your first step wouldn’t be to sue. You would need to pay a visit to your local police department.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Ilyce R. Glink’s latest book is The REAL U Guide to Bank Accounts and Credit Cards. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com