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Texas Tech Univ. School of Law

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Tuesday, July 23, 2013

One Nightmare of a Reverse Mortgage

HouseMoneys

Sarah Havemeyer of Southampton, N.Y., has been fighting OneWest, a California bank, in court for two years over her late mother’s reverse mortgage.

A reverse mortgage typically places a lien against a senior’s home in exchange for lump sum or periodic payments with the full amount borrowed not coming due until the borrower dies, moves, or sells.  The terms of this reverse mortgage, which dates back to 1997, make this home loan stand out from others.  At age 78 and a widow, Havemeyer’s mother signed up for a reverse mortgage “with a base interest rate of 9.95 percent, plus a 50 percent share for the lender of increases in the value of the house following closing, plus another 2 percent “maturity fee” to sweeten the payout even more.”  The reverse mortgage also called for a $33,000 mandatory purchase of an annuity by the homeowner “that is added to the principal balance and incurs compounding interest while lessening the lender’s future payments to the homeowner.”

Financial Freedom Acquisition LLC, a subsidiary of OneWest, is now filing for foreclosure.  Havemeyer, the executrix of her mother’s estate, is challenging the foreclosure and estimates the estate could owe up to $1.5 million on a reverse mortgage which Havemeyer’s mother only received $272,911 from.

This reverse mortgage may be an outlier, but elderly borrowers and their family members need to be aware that reverse mortgages can be hazardous to financial health.

See Kenneth R. Harney, One Woman’s Reverse Mortgage Nightmare, Miami Herald, July 20, 2013.

http://lawprofessors.typepad.com/trusts_estates_prof/2013/07/one-nightmare-of-a-reverse-mortgage.html

Elder Law, Estate Administration, Estate Planning - Generally | Permalink

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Comments

An appraisal of value of my home when I got my reverse mortgage in 2007 was $275K. I decided to take the mortgage, sell the house and use the equity to relocate. My equity would have been over $100K and I was retired. I depended much on the written estimate given to me by the lender showing how much it was anticipated my home would appreciate in a number of years, and it looked like I could not lose.

Within 6 months my home was only valued at $175K. This is something the Bank of America knew or should have known when they sold me on the darned thing. All my savings in that investment were gone.

Then home owner insurance went up 38%. I could not sell my house or even keep up with it - 1900 sq ft with big yard and pool. Imprisoned because terms did not allow me to rent it out. I was obliged to LIVE IN IT.

Right. No freedom to move, Had to pay and live in it. Now I am trying to give it back to the bank and they are taking their good time about taking it away from me.

What a fiasco!

Posted by: Joyce | Jul 26, 2013 4:03:23 AM

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