A reverse mortgage allows senior homeowners (over the age of 62) to borrow a certain amount of money against the value of their home without having to make any interest or principal payments. The mortgage is only due when the homeowner dies, sells the house or moves out. Accrued interest is added to the loan balance.
But, interest rates are typically higher than on traditional mortgages and the interest compounds, meaning by the time the homeowner has to pay back the reverse mortgage, he or she could owe more than double what was initially loaned. Furthermore, homeowners are still responsible for paying the insurance and taxes.
In some cases, older spouses have been put on the deed for the reverse mortgage and the younger spouses told their names could be added later. When their name wasn't added and their older spouse passed away, the lenders came looking for repayment and threatened foreclosure if they did not get it.
In addition to how quickly the interest compounds, there are concerns with how aggressive lenders are in marketing to seniors. Complaints include lenders marketing to seniors who cannot afford the fees, not explaining the risks associated with reverse mortgages and deceptive sales tactics. Some lenders have been accused of marketing reverse mortgages as free money. Others reportedly told seniors there was no risk of losing their home.
Information on Reverse Mortgage
Some reverse mortgage lawsuits have been filed against lenders, alleging their tactics are illegal. In 2011, lawsuits were reportedly filed against Wells Fargo and Fannie Mae, alleging they used illegal means to foreclose on homes that were subject to reverse mortgages. According to the lawsuits, the people who took out the reverse mortgage paid insurance that guaranteed when the borrower died, heirs would have the opportunity to buy the home at its appraised value, not at the value of the full mortgage balance, if home prices fell. Despite this, some lenders are accused of forcing heirs to pay the full mortgage balance, not the appraised value of the home. When the heirs refused, they lenders allegedly pushed the home into foreclosure.
Reverse Mortgage Attorney
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Last updated on Oct-19-12