A Red Flag on Reverse Mortgages

[groovedaddy]

It is the saddest of paradoxes: a government-backed financial maneuver intended to free up extra money for struggling older people turns out to have left some widows and widowers on the brink of foreclosure.

This week, AARP sued the Housing and Urban Development Department over a handful of reverse mortgages gone awry. Lenders, following the letter of one of HUD’s rules, are requiring newly widowed people who want to stay in their homes to pay off the balance of their loans quickly, even if it is much more than the value of the home. Because they can’t (or won’t), the lenders are foreclosing.

This is happening only to a small number of people who did not have their names on the reverse mortgage for a variety of reasons. Some spouses did not put their names on the applications in order to qualify for a bigger loan, without necessarily realizing that they were putting themselves in jeopardy.

Reverse mortgages were not supposed to work like this. Instead, the big idea was to let people who were cash-poor but relatively rich in home equity draw on some (but not all) of that stored value. They’d get a lump sum, a line of credit or a monthly check for either a fixed period or for as long as they stayed in the home. And nearly everyone thought the rules were clear: homeowners or their heirs would never, even decades later, owe a cent beyond the value of the property.

http://www.nytimes.com/2011/03/12/your-money/12money.html?ex=1316577600&en=2cc7238e53718428&ei=5087&WT.mc_id=BU-D-I-NYT-MOD-MOD-M194a-ROS-0311-HDR&WT.mc_ev=click

[LiberalEsto]

1. If there's a way for the banksters to screw people,

rest assured that they will find it and use it.

[CBGLuthier]

2. Scam Scam Scam and fuck Henry Winkler too.

Make the banks richer on the backs of the elderly and poor.

[azurnoir]

3. I've seen those commercials and thought

it sounded too good to be true

[littlewolf]

4. a guy did this who lived next door to my MIL ...

and when he died ... his kids lost the house because they could not pay his mortgage ....
they didn't even know he did it .....

[Siouxmealso]

6. you have a year to sell the house

My elderly mother-in-law has a reverse mortgage. The bank wants their money when she dies but my wife and I will have a year to come up with it. Granted, in this housing market it may take the whole year to sell it.

[Siouxmealso]

5. The lesson here is

if you know any people who are thinking about a reverse mortgage, be sure to advise them that both people's names had better be on the mortgage or the survivor is gonna get screwed.

[Paper Roses]

7. As a holder (widow) of a reverse mortgage, I agree.

This reverse mortgage was the worst thing we ever did. My husband is gone now, I have this huge burden on me that my kids will have to sort out.

I have a million regrets! Don't do it if you are ever giving it a second thought. I can't even get straight answers from the company who holds mine. I have ---or my heirs have- 6 months to pay it off. I takes about 2 years for everything to go through probate. No-one can tell me(at the RM co.) what I'm supposed to do about this. Especially in a down R.E. market. What if the house does not sell?
They seem to have no answer for me.