Bank should take the property back from you... You can short sale a reverse mtg...
If the lender tells you that they absolutely will not work with you on the value/loan balance for the purpose of selling the property, just as with any other loan, you still have the decision to make as to whether or not you continue to stay in the home and honor the reverse mortgage agreement, or leave the property anyway forcing the lender to foreclose on the home or give them a Deed in Lieu of Foreclosure. A short sale may or may not have negative effects on your credit, but a foreclosure or Deed in Lieu of Foreclosure certainly will. That is a big decision and one only you can make.
The big advantage of the borrower with the reverse mortgage is that while the home may be over-encumbered, the borrowers can live in the home, payment free, for life and when borrowers do pass or are forced to leave the home, the loan is a non-recourse loan so the lender can only look to the property to repay the debt if the borrowers or their heirs do not want to sell the home and repay the debt themselves. The reverse mortgage is intended to be the last loan you ever need. If you make the choice that you just don't want to live there anymore and do not pay the loan back, then you would be in default of the reverse mortgage agreement.
If you stop paying the taxes it will certainly raise the banks hairs to do something constructively and work along with you to short sale or deed in lieu which is how it was intended if it cannot be sold and is underwater...
Nobody will advise you to stop paying taxes or your mortgage unless it is a legal decision made by your attorney. But some things seem to be the obvious.
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