Moving Forward: the lifestyle blog for ages 50+

This week, I planned to write about European river cruises – a relaxing way to see parts of Europe which are ‘off the beaten path’.

However, this morning as I lay abed perusing emails on my Blackberry, I noticed an article on the NYT’s DealBook blog: Pitfalls of Reverse Mortgages May Pass to Borrower’s Heirs (by Jessica Silver-Greenberg).    The title alone was enough to propel me out of bed and onto my laptop!

Turns out: quite often – within weeks of the death of their loved one - many heirs are being threatened with foreclosure unless they pay the outstanding reverse mortgage in full.  This is outrageous! It is well-known that reverse mortgages are not the panacea they once seemed to be for seniors. But, no one ever suspected that they might be a boobytrap for our unsuspecting heirs, as well.

For those of you who are unfamiliar with reverse mortgages, let me briefly explain what a reverse mortgage is and how it is supposed to work. A reverse mortgage allows senior homeowners (62 years of age or older) to borrow money against the value of their homes to pay for their retirement. The money does not have to be paid back until the homeowner dies or moves out. Under federal rules, the survivors have the option to settle the loan at a percentage of the full amount. If the property sells for less than the lower amount, the shortfall is covered by borrower-funded federal insurance.

However, apparently mortgage companies are often-times threatening to foreclose unless the heirs pay the outstanding mortgage in full. Elder care advocates believe this is a growing problem which affects tens of thousands of people - not only the elderly, but their surviving family members as well. As our population ages and our debt increases, the problem is expected to increase. At present, 13% of reverse mortgages are already under water; and, the rate of default has risen from 2% ten years ago to more than 9.4%, now.

These increases are worry-some. But what can one say, other than we must be ever-vigilant. We must remember to not only read the fine-print in contracts but also to make sure that our care-givers and advocates are well-informed about our financial decisions as well as our - and their -legal rights!!

I also suggest that you read: Mortgage: Inheriting a Home and a Loan (by Vickie Elmer NYT - 3/27/2014). Both articles are posted to my Facebook page: TimeisMoneyNY