Proceeds From A Reverse Mortgage

Q. I recently read your article regarding "Thelma" and her son "Ted" who were pursued by their Medicaid state officials for repayment of Thelma's elder care expenses.

My question is: How would the situation have been if Thelma had obtained a HECM (reverse mortgage) guaranteed by HUD and HUD would have given son Ted time to refinance or sell Thelma's house, after her death to repay the reverse mortgage? Would the state Medicaid agency have to" back off", give preference to HUD as regard the house and not seek recourse from Ted for the $85K they were seeking?

A. I'm not a lawyer so what I am presenting here is my opinion based on my research and experience. The States typically will put a lien on the home. If there was a reverse mortgage it would seem to me that the reverse mortgage lender would receive their portion and if there was any remaining equity that it would go to the State (up to the amount they spent).

In your example, if Ted's name was not on the house and the reverse mortgage then he could sell the home, but the state and the reverse mortgage lender will get their money at closing. It's not unusual for the children to go to sell the parents home, to be at the title company with the buyer ready to sign the papers, only to find out that the state had a lien on the home. In that case everything typically is put on hold and in all likelihood the buyer moves on to another home.

Your posted comments on this and other questions are welcome.
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