Reverse mortgages can be helpful to elderly people in limited circumstances. However, if you or your loved ones are considering a reverse mortgage, you may want to hire an attorney to ensure what you think you are signing up for is really the beneficial reverse mortgage you think it is. Professor Gerry Beyer of Texas Tech University School of Law recently posted on his blog about a woman in New York who got a whole lot more than she bargained for – and not in a good way. See his post below.
“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.”