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If home has a mortgage or HELOC, it’s considered securitized lending, with the property & it’s inherent value is used to “secure” the loan.
If borrower defaults on payments due, the lender after a somewhat brief period of time - usually 90 days- will start foreclosure. The lending agreement will state the terms that trigger all this. Lender doesn’t care who pays mortgage; could be owner, you or Santa. As you all have been paying the note, all is good for lender.
To me, what to do depends on outstanding mortgage vs. equity in the home (if it’s “upside down” or is positive) & it’s likely sale price. Scenario 1 - say mortgage is 200k (horrors!) & dad has let property become a real POS so that it’s only worth it’s land value of 75k, I’d put the keys in a padded envelope & certified mail it to the lender and dad walks on the mortgage; they start foreclosure & send him a IRS 1099-C for whatever actual balance of the lending is at the time it finally becomes their property as that’s taxable income. Right now it’s almost September so it may not even be done for 2019 tax year but 2020. In this scenario, you totally stop paying for anything house ever as there’s no real benefit for you ever. There will be a 1040 & 982 tax filing to be done for whatever year the 1099-c is sent, but that’s down the road for a problem...... scenario 2- mortgage is 200k but property has realistic sale price of 450k. You find a Realtor who understands moving an “as is” Sale and has a record of doing like 30-60 days DOMs (days on market) sales. You have full financial DPOA for dad and house gets a weekend removal of the egregious nasty stuff by family & put on market ASAP. House sells for $400, 200 goes to mortgage Co at Act of Sale and dad gets abt 185k paid to him as there’s 6% realtor commission. Realize that 185k is TOTALLY his $. He cannot reimbursement you or your siblings for any of the costs you all have paid on house, as Medicaid will consider it to be gifting of $$$ from dad to you. Imho you would have needed to either have had a notarized Promissory Note or Memo of understanding on future costs paid to be secured lending between dad & you all done way waaayyyy before you paid a dime on the place to get around this; or you get a real pit bully of an elder law atty to challenge Medicaids gifting determination. Dad uses $185k to private pay for his stay in the NH. When he dies & if there is $ left, state can attempt to recoup whatever Medicaid paid before he went private pay; and if $ still left, it is distributed as per terms of his will in whatever type of probate court action that fits the circumstances (small estates affidavit, muniment, full probate). Choices are stark no matter what you do.
For family to honor elders wishes to keep old homestead, can be done. But imo property needs to be mortgage free w/ manageable costs & family needs to have wallet or purse to pay whatever costs for an unknown period of time. & a pretty deep sense of humor. Medicaid cannot force applicant to have their homestead to be sold per se. Only if it is over a certain value (550k or 750/800k depends on state) can a state not consider it to be an exempt asset. Rub is that Medicaid elder has zero $ to pay on house. Family has to pay all & they stop being all kum-ba-ya on shared responsibility & get zero interest on paying or dealing with it. Mortgage must be paid or it gets foreclosure. So it gets sold. Based on posts on this site, it’s abt 6-8 mo. mark where this happens & triggered by property tax bill.
Medicaids “lien” ability on property really gonna depend on your states laws on property rights. Not all states allow for a TEFRA type of lien placement (predeath); for some it is instead is only an after death lien or claim against the Estate. But whatever the case, Medicaid is not secured lending, the mortgage holder is and they get the $ first & foremost. They are not beholden to Medicaid.
What a great answer, and took so much time to give this kind of information. I see below that they are paying his mortgage out of their own funds. I think they are making a mistake there, and will never recover this money, which honestly they may need for themselves going forward.
It depends on what the house is worth, how much is still owed to the bank, and what Medicaid says; but the normal procedure would be to sell the house, repay the outstanding mortgage, and then spend down whatever capital remains before reapplying for Medicaid.
Medicaid doesn't yet *own* your father's house; they have a lien on it, which means that when it is eventually sold they get first dibs on the balance between what goes to the mortgage provider and what's left over.
But anyway - paying the upkeep on an asset that is not and never can be yours is bonkers. Were you hoping to make a different plan for the property but it hasn't worked out, or something like that?
You NEED to let the bank take his house. Since he is already on Medicaid, Why would you continue to pay the mortgage and upkeep out of your own funds that Medicaid will take anyway?
Glad, on the renting it aspect, yeah one could do that but imo you have to b careful. You remember PamStegman?, that’s what her family did and it actually worked out for them & with a bow on it. But she totally understood Medicaid policy for her state as that was a part of her job as an ombudsman. Rent ultimately is a math problem as you are supposed to charge FMV rent unless they were living there (I think JoAnn had this with her nephew) or there’s some other valid rationale for it to be occupied rent free. That “rent” is income for the elder and do has tax filing stuff to be dealt with AND also becomes income each month added into whatever other monthly income- like SS - that their getting. If they get $1600 income to begin with and FMV rent is $2,200 mo. (I’m in New Orleans and rents here in better areas are high), well that means $3,800 a mo income AND they are now over the Medicaid income limit to be considered “at need”. They would be instead Self pay for the NH. Problema is $3800 isn’t enough to ever pay for a month at the NH......
for some states, if property is vacant, certain property costs can be excluded from the Medicaid tally.
On keeping property, it can be done but in my experience it’s a pretty narrow path that has to be followed..... like no mortgage, either lower value or very high value (like edging Medicaid property limits); single person decision maker who is dpoa and has wallet to afford what essentially is a second or third home; great neighbors; do whatever to keep property secure but not enhance it; be ok on running risk on it as you do not own it and may not own it ever; be able to keep meticulous records to the penny for possibly years; understand the exclusions and exemptions to Estate Recovery for your state; have great neighbors, yeah worth mentioning twice; & be able to document whatever as needed; and be willing to do probate if need be & don’t mind ri$k.
Most of us can not afford a second home and do not like taking risk. If so, letting it go to foreclosure or sold as a highly motivated listing is imo what needs to happen & ASAP. There’s I’m guessing no real positive spin to jmcneil’s situation, it’s a slow bleed of $ by 1 of the siblings who has a 200 mile drive to the homestead so mileage cost & drive time atop everything else...... If the county removes the homestead exemption as mcNeils dad no longer lives there, the property taxes will likely increase. & bigly, like go from $2k to $10k. Stuff like this PLUS a mortgage just makes it a loose-loose situation.
Is Medicaid involved now, or anticipated to be? Or does he have enough funds to pay for his care indefinitely?
And what's the situation with his house? Is it in foreclosure, and if so, at what stage?
In addition, are you convinced, absolutely, that he'll never return home? Is in he AL, rehab or memory care?
It would also help if you shared your rationale for not keeping the house and just "letting it go."
If there is a legitimate reason for that, and if the house is in foreclosure, another option would a deed in lieu of foreclosure, a quicker method than the declaration of foreclosure, notices, Sheriff's Sale, etc.
But as Alva stated, much more information is needed before on point answers can be offered.
He will never return home. Has severe dementia. He has no money because Medicaid owns all assets. Family members now have to pay mortgage and all upkeep on the home. And half of siblings will not help pay. Wife has already pre deceased him. So there is no need to keep paying for the house, since any sale would go to Medicaid. The house is not in foreclosure yet because we have been keeping it afloat for now. But as my wife and I are the closest to the house and that is 200 miles. We are the ones that are called to fix any problems. And as we all know a vacant house can start to deteriorate fast.
I feel like I don't have enough information here. I agree with Worried in Cali that his credit would be ruined, and honestly he doesn't need credit. BUT I worry that you may be his financial power of attorney, and that he may have directed you to make payments on his home as per normal. Not knowing if his mental acuity is good enough to direct you or not, not knowing whether you are his POA and have decided he cannot both pay for his nursing home bills and his home, puts me in a position I cannot answer this. If the home has was bought years ago by him it may well be worth more than he paid, and the better idea could be to sell his home? But again, this is all so individual. If you have questions I would buy an hour of time with an Elder Law Attorney. Perhaps have a realtor stop by and evaluate the value of his home, how much is owing on it, and etc. Just not enough information to guess what might happen in this instance.
Nothing really except a negative entry on his credit history but that shouldn’t matter at all since he shouldn’t be trying to take out a credit line or finance anything.
By proceeding, I agree that I understand the following disclosures:
I. How We Work in Washington.
Based on your preferences, we provide you with information about one or more of our contracted senior living providers ("Participating Communities") and provide your Senior Living Care Information to Participating Communities. The Participating Communities may contact you directly regarding their services.
APFM does not endorse or recommend any provider. It is your sole responsibility to select the appropriate care for yourself or your loved one. We work with both you and the Participating Communities in your search. We do not permit our Advisors to have an ownership interest in Participating Communities.
II. How We Are Paid.
We do not charge you any fee – we are paid by the Participating Communities. Some Participating Communities pay us a percentage of the first month's standard rate for the rent and care services you select. We invoice these fees after the senior moves in.
III. When We Tour.
APFM tours certain Participating Communities in Washington (typically more in metropolitan areas than in rural areas.) During the 12 month period prior to December 31, 2017, we toured 86.2% of Participating Communities with capacity for 20 or more residents.
IV. No Obligation or Commitment.
You have no obligation to use or to continue to use our services. Because you pay no fee to us, you will never need to ask for a refund.
V. Complaints.
Please contact our Family Feedback Line at (866) 584-7340 or ConsumerFeedback@aplaceformom.com to report any complaint. Consumers have many avenues to address a dispute with any referral service company, including the right to file a complaint with the Attorney General's office at: Consumer Protection Division, 800 5th Avenue, Ste. 2000, Seattle, 98104 or 800-551-4636.
VI. No Waiver of Your Rights.
APFM does not (and may not) require or even ask consumers seeking senior housing or care services in Washington State to sign waivers of liability for losses of personal property or injury or to sign waivers of any rights established under law.
I agree that:
A.
I authorize A Place For Mom ("APFM") to collect certain personal and contact detail information, as well as relevant health care information about me or from me about the senior family member or relative I am assisting ("Senior Living Care Information").
B.
APFM may provide information to me electronically. My electronic signature on agreements and documents has the same effect as if I signed them in ink.
C.
APFM may send all communications to me electronically via e-mail or by access to an APFM web site.
D.
If I want a paper copy, I can print a copy of the Disclosures or download the Disclosures for my records.
E.
This E-Sign Acknowledgement and Authorization applies to these Disclosures and all future Disclosures related to APFM's services, unless I revoke my authorization. You may revoke this authorization in writing at any time (except where we have already disclosed information before receiving your revocation.) This authorization will expire after one year.
F.
You consent to APFM's reaching out to you using a phone system than can auto-dial numbers (we miss rotary phones, too!), but this consent is not required to use our service.
If borrower defaults on payments due, the lender after a somewhat brief period of time - usually 90 days- will start foreclosure. The lending agreement will state the terms that trigger all this. Lender doesn’t care who pays mortgage; could be owner, you or Santa. As you all have been paying the note, all is good for lender.
To me, what to do depends on outstanding mortgage vs. equity in the home (if it’s “upside down” or is positive) & it’s likely sale price.
Scenario 1 - say mortgage is 200k (horrors!) & dad has let property become a real POS so that it’s only worth it’s land value of 75k, I’d put the keys in a padded envelope & certified mail it to the lender and dad walks on the mortgage; they start foreclosure & send him a IRS 1099-C for whatever actual balance of the lending is at the time it finally becomes their property as that’s taxable income. Right now it’s almost September so it may not even be done for 2019 tax year but 2020. In this scenario, you totally stop paying for anything house ever as there’s no real benefit for you ever. There will be a 1040 & 982 tax filing to be done for whatever year the 1099-c is sent, but that’s down the road for a problem......
scenario 2- mortgage is 200k but property has realistic sale price of 450k. You find a Realtor who understands moving an “as is” Sale and has a record of doing like 30-60 days DOMs (days on market) sales. You have full financial DPOA for dad and house gets a weekend removal of the egregious nasty stuff by family & put on market ASAP. House sells for $400, 200 goes to mortgage Co at Act of Sale and dad gets abt 185k paid to him as there’s 6% realtor commission. Realize that 185k is TOTALLY his $. He cannot reimbursement you or your siblings for any of the costs you all have paid on house, as Medicaid will consider it to be gifting of $$$ from dad to you. Imho you would have needed to either have had a notarized Promissory Note or Memo of understanding on future costs paid to be secured lending between dad & you all done way waaayyyy before you paid a dime on the place to get around this; or you get a real pit bully of an elder law atty to challenge Medicaids gifting determination. Dad uses $185k to private pay for his stay in the NH. When he dies & if there is $ left, state can attempt to recoup whatever Medicaid paid before he went private pay; and if $ still left, it is distributed as per terms of his will in whatever type of probate court action that fits the circumstances (small estates affidavit, muniment, full probate).
Choices are stark no matter what you do.
For family to honor elders wishes to keep old homestead, can be done. But imo property needs to be mortgage free w/ manageable costs & family needs to have wallet or purse to pay whatever costs for an unknown period of time. & a pretty deep sense of humor. Medicaid cannot force applicant to have their homestead to be sold per se. Only if it is over a certain value (550k or 750/800k depends on state) can a state not consider it to be an exempt asset.
Rub is that Medicaid elder has zero $ to pay on house. Family has to pay all & they stop being all kum-ba-ya on shared responsibility & get zero interest on paying or dealing with it. Mortgage must be paid or it gets foreclosure. So it gets sold. Based on posts on this site, it’s abt 6-8 mo. mark where this happens & triggered by property tax bill.
Medicaids “lien” ability on property really gonna depend on your states laws on property rights. Not all states allow for a TEFRA type of lien placement (predeath); for some it is instead is only an after death lien or claim against the Estate. But whatever the case, Medicaid is not secured lending, the mortgage holder is and they get the $ first & foremost. They are not beholden to Medicaid.
Medicaid doesn't yet *own* your father's house; they have a lien on it, which means that when it is eventually sold they get first dibs on the balance between what goes to the mortgage provider and what's left over.
But anyway - paying the upkeep on an asset that is not and never can be yours is bonkers. Were you hoping to make a different plan for the property but it hasn't worked out, or something like that?
What about equity in the home? Home's value? Do you have POA so you could sell it?
Has the house been cleaned out? Could it be rented?
Get with an elder law attorney for help.
for some states, if property is vacant, certain property costs can be excluded from the Medicaid tally.
On keeping property, it can be done but in my experience it’s a pretty narrow path that has to be followed..... like no mortgage, either lower value or very high value (like edging Medicaid property limits); single person decision maker who is dpoa and has wallet to afford what essentially is a second or third home; great neighbors; do whatever to keep property secure but not enhance it; be ok on running risk on it as you do not own it and may not own it ever; be able to keep meticulous records to the penny for possibly years; understand the exclusions and exemptions to Estate Recovery for your state; have great neighbors, yeah worth mentioning twice; & be able to document whatever as needed; and be willing to do probate if need be & don’t mind ri$k.
Most of us can not afford a second home and do not like taking risk. If so, letting it go to foreclosure or sold as a highly motivated listing is imo what needs to happen & ASAP. There’s I’m guessing no real positive spin to jmcneil’s situation, it’s a slow bleed of $ by 1 of the siblings who has a 200 mile drive to the homestead so mileage cost & drive time atop everything else......
If the county removes the homestead exemption as mcNeils dad no longer lives there, the property taxes will likely increase. & bigly, like go from $2k to $10k. Stuff like this PLUS a mortgage just makes it a loose-loose situation.
And what's the situation with his house? Is it in foreclosure, and if so, at what stage?
In addition, are you convinced, absolutely, that he'll never return home? Is in he AL, rehab or memory care?
It would also help if you shared your rationale for not keeping the house and just "letting it go."
If there is a legitimate reason for that, and if the house is in foreclosure, another option would a deed in lieu of foreclosure, a quicker method than the declaration of foreclosure, notices, Sheriff's Sale, etc.
But as Alva stated, much more information is needed before on point answers can be offered.