Is this Mortgage Fraud
Long story short, neighbor has been doing construction in the inhabitable cellar in a 1 family house with a reverse mortgage. Now a walk in room with full size door has been added to the back of house for easy entrance to the bulkhead cellar entrance. The bilco has been removed. I suspect an illegal apartment (town called but no help). His house has now been put on the market for rent. Rental terms are Lease/Rent Term: 1-6 Months, 12 Months, Over 12 Months. Ad is online with multiple listing realtors. I suspect he may use the cellar as an apartment for himself (illegal as it is inhabitable per city) and rent the upstairs. Should I be concerned as a neighbor 1. that this may be a case of fraud 2. that this may invalidate his house insurance 3. If there is a house fire or any other damage (tree falling, etc), there will be no insurance to pay for repairs since he is violating the terms of the mortgage? by kateteeeee110 from Bronx, New York. Jan 28th 2016
William J Acres (William_Acres)
#74 ranked lender in Arizona - 8,728 contributions
More info would be needed.. Mortgage Fraud! No.. this is not mortgage fraud.. Per Reverse mortgage guidelines, he must live in the property.. which you say he is.. He might be in violation of city/county building codes regarding the construction and improvements since they most likely will need to have building permits pulled and the construction process inspected. If there is a fire or other damage that affects neighboring properties, it's most likely going to be covered by his insurance, and if not his insurance, then certainly by the affected property owners insurance. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347
William J Acres (William_Acres)
#74 ranked lender in Arizona - 8,728 contributions
Again, the guideline for a reverse mortgage is that it must be your primary residence.. (Keep in mind, FHA allows you to finance up to 4 units with a RM) so, you are allowed to rent out a room, half the house or all but one room of the house, so long as the borrower maintains this is their primary residence, it's allowed and your not breaking any rules. As far as the lender is concerned, even if the basement was converted but not permitted, then it really does not matter to them.. again, he must live in the house, which according to you, he does. You say that the basement apartment is not allowed, but you called the city and they didn't do anything! So if this conversion was illegal, wouldn't the city do something? Possible Fine? Possibly make him apply for a permit and have it inspected or Possibly make him remove the room? Again.. you are saying it's uninhabitable, but you called the city and they haven't responded, so is it really uninhabitable? As I stated earlier, he might be breaking the rules for building code, or possibly a zoning violation, and if he was in violation and you called it in, they would be obligated to do something about it, but this all has nothing to do with his loan.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347
Thanks, again. Yes, it is inhabitable per city records. So, if I see he is living down there (he built a back entrance door 12 feet from my kitchen window), I'll take it to the city to enforce. We are zoned one family and the cellars cannot be used for living/sleeping, and it's an underground cellar with no emergency exit (a fire hazard and against code). I was friends with the previous neighbor so I have been in the house many times and know the layout. He will be renting to "non-relatives" who will occupy the habitable two floors upstairs. He may actually have someplace else to live I'm not sure, but considering the construction it leans toward an illegal apartment.Time will tell.
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