Just.the.facts.mam
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- Jurisdiction
- Texas
Mortgage company loans a married couple an amount of money and determines the maximum amount will be $250,000. The terms of the loan agreement state the borrower(s) can take advances in the form of lump sum, monthly payment, line of credit or a combination so long as the maximum is not exceeded. Furthermore, borrower(s) are considered to be both spouses or surviving spouse should one die. The contract is not changed in any way at the death of one of the borrowers. In turn, the mortgage company files a lien on the community property the couple owns as security for the loan.
The initial draw on the loan is $50,000. Sometime after the initial draw the husband passes away. The loan agreement is still valid as no provision is made to change anything at the death of one borrower. The mortgage company is obligated to continue making loan advances to the surviving wife. The husband has left his half of their community property to his children from a previous marriage. By state law the wife can remain in the homestead until her death and she chooses to do so, drawing the remaining $200,000 for living expenses over the next several years.
The question is what has happened to the collateral; the security the mortgage company has against this loan? Half the property is now owned by a party who might not agree to encumber it with additional loans. How could the wife continue to draw on the reverse mortgage?
At the wife's death the property is sold and a small equity remains but a big argument between the two sets of heirs. The husband's heir says that all the draws on the loan made after the father's death is not his responsibility and he should take all the equity. His justification is that the draws amounted to additional loans and therefore required his approval. The wife's heir says that the loan was one loan and the mortgage lien was established prior to the husbands death and therefore attributed to each estate equally.
What do the experts say?
The initial draw on the loan is $50,000. Sometime after the initial draw the husband passes away. The loan agreement is still valid as no provision is made to change anything at the death of one borrower. The mortgage company is obligated to continue making loan advances to the surviving wife. The husband has left his half of their community property to his children from a previous marriage. By state law the wife can remain in the homestead until her death and she chooses to do so, drawing the remaining $200,000 for living expenses over the next several years.
The question is what has happened to the collateral; the security the mortgage company has against this loan? Half the property is now owned by a party who might not agree to encumber it with additional loans. How could the wife continue to draw on the reverse mortgage?
At the wife's death the property is sold and a small equity remains but a big argument between the two sets of heirs. The husband's heir says that all the draws on the loan made after the father's death is not his responsibility and he should take all the equity. His justification is that the draws amounted to additional loans and therefore required his approval. The wife's heir says that the loan was one loan and the mortgage lien was established prior to the husbands death and therefore attributed to each estate equally.
What do the experts say?