Seniors Warned to Be Careful with Reverse Mortgages
Defaults on reverse mortgages are hitting record highs and these loans are being blamed for turning seniors out of their homes.
Home owners who are 62 and older can apply for reverse mortgages to borrow money against the equity in their homes. The loans don’t have to be repaid until the home owner moves out or dies. Reverse mortgages are seen as a way for home owners to use the equity in their homes for retirement. But the home owners still have to pay property taxes, maintenance, and insurance on the home.
Some housing experts warn that lenders are advertising the loans to seniors as “free money” that can be used to fund fancy vacations but not detailing all the risks associated with these types of loans.
For example, several widows across the country have stepped forward saying they are facing foreclosure and eviction following their spouse’s death because they weren’t included on the reverse mortgage deed. The widows say they have no claims to live in the home unless they purchase it outright following their spouse’s death, The New York Times reports.
The Consumer Financial Protection Bureau is working on new rules for improving the disclosure of reverse mortgages and the hidden risks, as well as more supervision of lenders who issue these loans.
Source: “A Risky Lifeline for Seniors Is Costing Some Their Homes,” The New York Times (Oct. 14, 2012)