General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsBut Fred Thompson TOLD Me....
that a reverse mortgage was a great idea! And he said in the commercial that it was a law passed by President Reagan so it had to be good, right? I'm shocked to find that it isn't as good of a deal as Fred made it out to be.
The only solace for Isabel Santos as she spends her evenings huddled over stacks of yellowed foreclosure notices is that her parents are not alive to watch their ranch-style house in Pleasant Hill, Calif., slipping away.
Ms. Santos, 61, along with a growing number of baby boomers, is confronting a bitter inheritance: The same loans that were supposed to help their elderly parents stay in their houses are now pushing their children out. My dad had nothing when he came here from Cuba and worked so hard to buy this house, Ms. Santos said, her voice quivering.
Similar scenes are being played out throughout an aging America, where the children of elderly borrowers are learning that their parents reverse mortgages are now threatening their own inheritances. Reverse mortgages, which allow homeowners 62 and older to borrow money against the value of their homes that need not be paid back until they move out or die, have long posed pitfalls for older borrowers.
Now many like Ms. Santos are discovering that reverse mortgages can also come up with a harsh sting for their heirs.
Under federal rules, survivors are supposed to be offered the option to settle the loan for a percentage of the full amount. Instead, reverse mortgage companies are increasingly threatening to foreclose unless heirs pay the mortgages in full, according to interviews with more than four dozen housing counselors, state regulators and 25 families whose elderly parents took out reverse mortgages.
http://dealbook.nytimes.com/2014/03/26/pitfalls-of-reverse-mortgages-may-pass-to-borrowers-heirs/?_php=true&_type=blogs&hp&_r=0
yeoman6987
(14,449 posts)The idea for the reverse mortgage is for the couple or single parent to live out their days with an extra stream of money coming in. The idea is that after you die the bank owns the home. The children could buy it or pay off the loan. This practice has been known for years. It is not the children's home or mortgage so of course the kids are going to have to pay in full or get their own loan to pay in time. This is not something that is a shock.
kcr
(15,300 posts)Under federal rules, survivors are supposed to be offered the option to settle the loan for a percentage of the full amount. Instead, reverse mortgage companies are increasingly threatening to foreclose unless heirs pay the mortgages in full, according to interviews with more than four dozen housing counselors, state regulators and 25 families whose elderly parents took out reverse mortgages.
yeoman6987
(14,449 posts)Laxman
(2,419 posts)of the reverse mortgage. There are two immediately evident problems. The reverse lenders aren't following the rules and the terms aren't exactly consumer friendly. In the two years between when Mrs. Santos took out the reverse mortgage and when she dies she ran up a balance of $308,000? What were they paying out, $15,000/month? I'd wager that the interest rate on this reverse loan was something in the predatory range.
House of Roberts
(5,120 posts)That would explain the total, and the company would be the sole lienholder on the property.
Bandit
(21,475 posts)Interest is added to the amount you borrow every month, so your equity in your home is being gobbled up monthly. The interest rates are not very high but are compounded. Interest rates are around six percent compounded monthly. So even if your home increases in value at the average of four percent a year you still lose equity. Actually a Reverse Mortgage can be a lifesaver for some. Imagine if your are on a fixed income and paying a mortage that is about seventy percent of your income. You get a Reverse Mortage and pay off your current mortage and then you have zero payments. That seventy percent of your income you had been paying you nopw stick in your pocket. when you decide to sell your home you pay off your Reverse Mortgage and be happy with whatever money you have left.