Nearly 100,000 loans that allowed senior citizens to tap into their home equity have failed, blindsiding elderly borrowers and their families.
…In many cases, the worst toll has fallen on those ill-equipped to shoulder it: urban African Americans, many of whom worked for most of their lives, then found themselves struggling in retirement.
…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.
…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.
…Consumer advocates said the analysis supports what they have complained about for years – that unscrupulous lenders targeted lower-income, black neighborhoods and encouraged elderly homeowners to borrow money while glossing over the risks and requirements.
USA TODAY found that reverse mortgages end in foreclosure six times more often in predominantly black neighborhoods than in neighborhoods that are 80% white.
Even comparing only poorer areas, black neighborhoods fare worse. In ZIP codes where most residents make less than $40,000, the analysis found reverse mortgage foreclosure rates were six times higher in black neighborhoods than in white ones.
…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 loans, does not sign off on evictions – or even count them.
…They work like this: Lenders appraise the value of a house and allow homeowners to borrow back money against that market value.
Borrowers can stop making monthly mortgage payments, and they can stay put for life, so long as they maintain the home and pay property taxes and insurance.
…At the end – a move out, death or default – the bank calls the loan due, to be paid back either by the sale of the home or an heir or homeowner repaying the loan money. Lenders and their investors make their money through origination fees that can top $15,000 with fees and mortgage insurance, and by charging interest on the loan balance.
…“Adult children that have been trying to take care of their mother or father or both get the idea that ‘When mom or dad passes, I’m going to have a little inheritance or get this place on the market,’ ” Nordgren said. “Then the death happens and … here comes the foreclosure.”
…Charles, [Frazier] died at 88 of a heart attack in the family home a few miles west of Roseland, in Beverly. At that point, in December 2017, an unpaid $4,351 property tax bill led to the default.
,,,,,Celink told Frazier in February that she could buy the house by paying off the loan’s balance: $209,053, including fees and interest. Frazier and her brother said it’s far more than they can afford to pay.
…Even when both husband and wife are old enough to qualify, reverse mortgage lenders often advise them to remove the younger spouse from loans and titles.
…Widows not on the title must meet various deadlines – at 90 and 120 days after the death – to provide their loan companies with death certificates and other documents.
Blair sent in paperwork she thought solved the problem. She discovered she had missed one document – changing the deed to her name within 90 days – months later after a foreclosure notice arrived in her mailbox.
…The suit alleged brokers targeted the minority homeowners for the “mortgage products and overpriced home repair work that they did not need or cannot afford” to capitalize on elderly widows unaccustomed to both the home’s finances and home repair.
Seniors face foreclosure in retirement after failed reverse mortgage