It’s Not Just Your Mother’s Reverse Mortgage: Pitfalls Impact Multiple Generations
By Consumers Union on Thursday, March 27th, 2014
What exactly should you do when you find out that your mother’s reverse mortgage stripped all the equity out of a family home? Slap this reality down next to the fact that you may have just lost your mother and you yourself are an aging adult. What then?
Such is the plight of more and more Americans, the children of reverse mortgage borrowers, who are stunned when they learn about how their parents’ reverse mortgage may have just undermined the next generation’s financial stability that could come through an inheritance. To be sure, no one is entitled to an inheritance. It’s always the senior homeowners’ option to do what they want with their home. But when a reverse mortgage has been sold to a senior who doesn’t fully appreciate the impact on potential heirs, or thinks the reverse mortgage will serve them well while it unwittingly undermines other intentions, well, we’ve got a big problem on our hands.
Just ask the adult children of two reverse mortgage borrowers whose stories appeared in the New York Times yesterday, Ms. Isabel Santos, 61, of Pleasant Hill, California, and Laura Bitting, 61 of Muskogee, Oklahoma. They live on opposite ends of the country, but they share a common burden of dealing with the specter of impending foreclosures on their parents’ homes, both encumbered with reverse mortgages.
Reverse mortgages aren’t for everyone, but if you listen to the sales pitches on TV, you might think they are a good thing for any senior homeowner. If you’re considering a reverse mortgage, before making any decisions, get all the facts, proceed with caution and remember, Consumers Union recommends a reverse mortgage only as a loan of last resort, after a homeowner has considered all other options available. In August 2012, Consumers Union and the California Advocates for Nursing Home Reform wrote to the CFPB and asked the agency to protect reverse mortgage borrowers and their families. We hope they do so soon.
In the meantime, there are measures borrowers and their families considering a reverse mortgage should take to make sure they make the right decision about a reverse mortgage. Be sure you read our TIPS for potential reverse mortgage borrowers. The last thing you want is for you or your parent to be another reverse mortgage default statistic, like one of the 54,000 borrowers in default mentioned in the CFPB’s 2012 report to Congress.
Are you stressing out over your own or a parent’s reverse mortgage? Share your story with us in the Comments section below.