Thursday, June 20, 2019
USA Today, ran this story, Seniors were sold a risk-free retirement with reverse mortgages. Now they face foreclosure. This is not a happy story.
Alarming reports from federal investigators five years ago led the Department of Housing and Urban Development to initiate a series of changes to protect seniors. USA TODAY’s review of government foreclosure data found a generation of families fell through the cracks and continue to suffer from reverse mortgage loans written a decade ago.
These elderly homeowners were wooed into borrowing money through the special program by attractive sales pitches or a dire need for cash – or both. When they missed a paperwork deadline or fell behind on taxes or insurance, lenders moved swiftly to foreclose on the home. Those foreclosures wiped out hard-earned generational wealth built in the decades since the Fair Housing Act of 1968 1
. . .
Borrowers living near the poverty line in pockets of Chicago, Baltimore, Miami, Detroit, Philadelphia and Jacksonville, Florida, are among the hardest hit, according to a first-of-its-kind analysis of more than 1.3 million loan records. USA TODAY worked in partnership with with Grand Valley State University, with support from the McGraw Center for Business Journalism.
The article looks at some examples of individuals who are in trouble and examines the situation that led us to this point.
Federal regulators and industry leaders cautioned that numbers alone tell only part of the story, since many foreclosures result from the natural end of reverse mortgages: the homeowner’s death. The average term of a reverse mortgage is about seven years, and if a family member is not willing or able to repay the loan, lenders push the property through foreclosure.
Regulators said actual evictions of seniors are rare. There’s no way to verify that, though, since HUD, the top government regulator of Home Equity Conversion Mortgage 4 loans, does not sign off on evictions – or even count them.
The article is lengthy but full of important information. Read it yourself, and then assign it to your students.
Thanks to my colleague and dear friend, Professor Bauer, for sending me the article.