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TagsBY CAROL ABAYA
NEWJERSEYNEWSROOM.COM
THE SANDWICH GENERATION
Reverse Mortgages (RM) continue to catch borrowers in a ‘bait and switch” scam.
Now AARP has sued the federal government, the Department of Housing and Urban Development (HUD), on behalf of the surviving spouses of three people who had a reverse mortgage and died. The surviving spouses were not on the mortgage and now face foreclosure and eviction.
The borrowers in the AARP case all died, leaving their spouses living in the mortgaged homes. Because of the housing downturn, the homes are now worth less than the balance due on the reverse mortgage. None of the spouses can obtain loans for more than their homes are worth and are facing eviction.
Reverse Mortgages are available to those 62 and over and allow those on the mortgage to live in the house until death. However, if one spouse (usually the wife) is younger than the borrower, she cannot be on the mortgage. Then she cannot remain in the house unless she pays off what is owed on the mortgage, which can be substantially more than the value of the house.
The original HUD rules governing RMs stated that a borrower or heirs would never owe more than the home was worth at the time of repayment. This was changed in 2008 and the current law states that a surviving spouse not named on the mortgage must pay the full balance in order to keep the home, even if the amount due is more than the property value. Heirs must also pay the full amount due if they want to keep the house.
In one case, the heirs of a woman who received $82,000 over a 13-year period received a bill from the RM company for over $600,000.
The full balance, as previously reported by New Jersey Newsroom, includes costs for insurance, origination fees, and daily compounded interest.
This means that the lender gets interest on interest as well as continuing interest on all the fees and insurance costs.
Often this eviction scenario occurs because greedy mortgage brokers tell a person 62 and over not to include the under 62-year-old spouse on the mortgage. This leaves the survivor in limbo after their spouse dies.
Please see next week’s article for more on reverse mortgages.
The Sandwich Generation is reader interactive. Questions are welcome through Carol Abaya’s website www.sandwichgeneration.com or via email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
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http://www.reversemortgagelendersdirect.com/
Do you realize that the lender has not seen ONE DIME from this mortgage? The borrower received $82,000 (as YOU say) but the lender has yet to receive one - lets change that to - PENNY since that money was given to the borrower. These loans do not require any payments. Yes, a borrower does accrue interest and fees over the life of the loan. They are fully disclosed - as in any "forward" mortgage. You advocates don't think anything of taking out a mortgage to buy a $100,000 home and end up paying almost $300,000 over many years - BUT you get on your high horses when a senior takes equity out of their home and owes considerably more at their life's end. I don't agree with that $600,000 figure either. You really need to find another CAUSE. One where you won't be so unfairly biased.
You state above,
"if one spouse (usually the wife) is younger than the borrower, she cannot be on the mortgage"
This statement would be accurate if the borrower is younger than 62.
You statement is misleading.
I agree with Mr. Reverse above. Only in exceptional cases when dealing with a reptuable lender would a reverse mortgage be done with only one spouse on the mortgage note.
Where is the bait and switch? This program is fully disclosed and borrowers are required to attend a HUD approved counseling session.
Before posting your article next week please do your due diligence and research the program itself. You may want to call a trusted lender or better yet a call to a HUD approved counselor. Even AARP has valuable information on their website.