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Q: We took out a reverse mortgage three years ago. The home insurer bailed out of Florida recently, and we’re having an extremely hard time finding another. We are considering just walking away from the house and using the $25,000 we have left to buy a small condo. What would we owe the reverse mortgage lender? – Nora
A: Probably nothing. It depends on what type of reverse mortgage you have. If you have the most common kind, a government insured HECM mortgage loan, there can be no deficiency. This is because the loan is a non-recourse loan. In most loans, the bank has the right to pursue a deficiency judgment against the borrower — the difference between the amount that is owed to the lender and what the property is worth. This type of loan is known as a recourse loan. However, certain loans, such as the HECM reverse mortgage, are non-recourse, meaning that the borrower can never owe to the lender more than the value of the property. However, before you decide to walk away from your home, I strongly recommend that you seek the counsel of an experienced real estate professional because there may be other consequences to your decision. Good luck.
via Ask a real estate pro: What happens if I walk away from a reverse mortgage?.