Here’s how a reverse mortgage works: If you have equity in your home, you can enter into a reverse mortgage that will pay you money for the rest of your life, or until you sell the house. Money comes in every month, or you have a line of credit to draw on. If a borrower dies or sells, the loan is paid off when the home is sold, but never more than the home is worth.
So how then did some seniors get eviction notices when the homes were foreclosed out from under them? Because those particular seniors weren’t on the mortgage documents. Perhaps the senior who took out the reverse mortgage was the only one of the two who was over age 62, and they would receive more money if only the elder senior signed up. Perhaps the two of them weren’t married yet.
No matter how it happened, HUD retroactively changed the rules and demanded that the loans be paid off in full when the original signers died, no matter the value of the homes. When the remaining seniors couldn’t raise the money and couldn’t sell for the amount demanded, foreclosure followed. At the same time that they demanded full repayment of the loan from surviving spouse and heirs, HUD was allowing third-party purchasers to buy those homes at below appraised market value.
If you’re determined to do a reverse mortgage, get expert advice. You’ll be required to attend counseling, but don’t stop there. Seek other advisers.
And if you’re a couple, beware having only one of you sign.
Matilda Charles regrets that she cannot personally answer reader questions, but will incorporate them into her column whenever possible. Write to her in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL 32853-6475, or send e-mail to email@example.com.
(c) 2011 King Features Synd., Inc.