Lenexa Estate Planning and Probate Attorneys

Reverse Mortgage Scam Causes Seniors to Face Foreclosure and Eviction

Kansas Seniors At Risk Of Facing Foreclosure As Defaults on Reverse Mortgages Hit Record Rates

In 2007 I was skeptical, at best, about Reverse Mortgages. As the Elder Law Project Manager for the law firm I worked at I traveled around nine different counties in Kansas and heard countless tells about how people had lost money and at times their homes because of an offer that sounded “too good to be true.” That’s when I wrote an article “The Pros and Cons of Reverse Mortgages.”

However, over the years the laws have changed and more protection has been afforded to those who chose a Reverse Mortgage as an option to pay bills, travel, or just have a little more spending cash each month. I can even say, as a Kansas Bankruptcy Attorney, I have since suggested to senior clients that have navigated through a Chapter 7 Bankruptcy and still need a little more help to hold on to their home that they should speak to a representative about their Reverse Mortgage options. That advice may change once again.

Recently defaults on Reverse Mortgages have hit record rates. What this means to the seniors holding more than 775,000 Reverse Mortgage loans is that they will be facing foreclosure. That instead of protecting their home, they may be at risk of losing it. The laws changed to provide additional protections, so the lenders changed their sales pitch.

As in the past, some lenders are still pushing loans on seniors that cannot afford them – the fees involved, the cost of the property taxes, or maintenance of the home. The borrower is unfamiliar with all of the risks, but promised great rewards. However, for some lenders the deceit has gone far beyond the lack of disclosure.

In what can be classified as nothing more than a scam, brokers first pressure a husband and wife to get a Reverse Mortgage. After the couple agrees that it is in their best interest, the lender then persuades them that it will be easier for them to qualify for the loan if it is only in the husband’s or the older spouse’s name. If the loan is in the husband’s name alone, the deed to the home is in the husband’s name only as well.

Statistically speaking men die at a younger age then women. Assuming that the husband does die first, the result is a widow that holds no title to her home and cannot qualify to refinance the property or pay the Reverse Mortgage which is now due in full (which could be a couple of thousand dollars to a couple of hundred thousand dollars). She will face foreclosure and eviction. Within months the seniors that are victims of this scam lose not only their spouse, but their home as well. The lender, on the other hand, gains full title to real estate at minimal expense – in perhaps just a few years time.

Used correctly, Reverse Mortgages can keep seniors in their home. However, with lower home values it is increasingly difficult for Brokers to make money on Reverse Mortgages without using some unethical tactic in the process. This is why many of the big name companies are no longer even offering Reverse Mortgage services.Seniors are handing their homes over to lenders after being evicted through foreclosure when Reverse Mortgages go bad

If you are considering a Reverse Mortgage make sure you fully understand the risks and fees involved. In addition, make sure both you and your spouse are protected if something were to happen to one of you. Don’t just hand your home over to the mortgage company!

If you are considering a Reverse Mortgage to assist with other debt you have accumulated, then you should also consider getting a free bankruptcy consultation. A Chapter 7 Bankruptcy or Chapter 13 Bankruptcy can help you eliminate other debt that may be causing stress while still protecting your family and important assets: your home, retirement, car, and other personal property under Kansas Bankruptcy Exemptions.


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