Are you thinking about a reverse mortgage? – Think again!
Six years ago, Kenneth and Sadako Miller were struggling to pay their bills. Then they saw an advert on TV that answered their money woes. Kenneth was a disabled Vietnam Veteran and lived with his Japanese wife in Gardner, Massachusetts Both were Seniors. This was a product which promised to turn the value of their home into monthly cash payments without a sale and they could live in it for both their lifetimes without making any payments.
They called the advertised number got into a reverse mortgage really fast. They felt that as the new mortgage was insured by the US government, it was legal and reputable. Now, a few years into the deal, the aging couple are facing foreclosure. The stress made Kenneth ill and Sadako resorted to crying a lot. The lender’s lawyers have recently warned them they could lose their home at any time.
The Millers, aged 69 and 68, are a growing number of reverse mortgage holders about to be thrown out of their homes. Families and supporters of these victims say the scheme has a poorly-understood loan feature. Others are just angry and outraged. They will say there is a lot more to reverse mortgages than what the sellers of these lethal financial instruments will tell their buyers. This is a well-known fact and anyone who is thinking of getting into one of these mortgages has to know this.
All property and especially residential homes generate ongoing liabilities. Start with property tax and insurance costs. These costs usually run into four figures in most places. As folks get older, it becomes more of a struggle to meet these payments. In the small print of most Reverse Mortgage Contracts, it will state it is up to the owners to keep these payments up to date and failure to do so will lead to foreclosure.
When borrowers fail to pay real estate taxes or house-insurance premiums, they can lose their homes. New orders from the federal government have allowed such lenders to get tough on people who cannot pay property charges. Lenders who do not want to lose federal insurance must foreclose or take on the insurance risk themselves. There are currently over 600,000 reverse mortgages insured by the FDIC in the US alone. There is a historic accumulation of loans with unpaid property charges. This gives the deed holders an entitlement to legally foreclose.
With a reverse mortgage the homes is used as loan security. The loan comes as a lump sum or by monthly payments. There are no loan repayments on the debt until the borrower dies, moves out or critically, the fail to keep up the property charges. The Millers took out their reverse mortgage about a decade ago. As a result of not fully understanding what they were getting into, their debt has climbed to more than $115,000. The Millers worked with their loan servicer to come up with a payment plan. This made them cover unpaid taxes. Then a few months later, the Millers learned their mortgage was moved to another company, Reverse Mortgage Solutions Inc. Then this new company told them it didn’t know about any new payment plan. The Millers were then informed they had to pay $10,137 within four months. Failure to pay would result in foreclosure and eviction.
This outcome is nothing new with reverse mortgages. The objective of the lender in reverse mortgage loans is very clear. Get legal possession of the mortgaged property. The sooner the better for them. For the borrowers, the decision was made when they signed for the mortgage. To be badly advised, misinformed or even misled is not illegal. Many reverse mortgage companies rely on this. Reputations don’t matter. At the end of it all, it’s all about the money, your money, your property, everything you have. That’s how fraud is.