I just closed a reverse mortgage on Friday, where the folks need nearly $5,000 in work done to the house, post-funding.
I had a licensed contractor go out and quote it, and they can either choose to have him do the work for them, or the husband, who just retired from doing maintenance work for the Chicago Housing Authority, can do all the work himself, if he wants to save a few bucks.
Everytime I have a contractor go out and quote a job, I hear the same gripe, "what do you mean I can't get ANY money until ALL the work's been done and inspected?"
"You mean I can't get a draw for materials? No draw for partial labor?"
Contractors can't seem to come to understand that although the money for repairs is escrowed in a
set-aside account, by the reverse mortgage servicer, that there ain't nothin' I can do about it: they can't get ANY money until ALL the work has been done and inspected.
So this poses the question: shouldn't reverse mortgages allow repair money to be released in draws for material & partial labor?
Sure seems that way to me.
Now in this reverse mortgage, I can get some money lump sum for these borrowers, and they can get materials from the lump sum money.
After the work is done and inspected, they can get the repair set-aside funds released to them.
But in many reverse mortgage transactions, like a short refinance into a reverse mortgage to avoid foreclosure, there is no extra money that we can deliver to the borrower or contractor to pay for materials and/or partial labor.
The current system of not releasing repair set-aside money in draws is not working for our seniors. And something should be done about it.
Please comment below...
Sincerely, your friend,
Scott Tucker
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