Failed Loans Hitting Older Americans
REVERSE MORTGAGE ISSUES PLAGUING URBAN RETIREES
A dramatic USA Today piece exposes significant issues with loans involving seniors, especially in large cities. Research and analysis of more than one million loan records revealed 100,000 failed loans that tapped into retirees’ home equity, illustrating the pervasive problem with reverse mortgages. As a result, the Department of Housing and Urban Development (HUD) has initiated a series of changes to protect seniors. According to the article, “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.” Chicago, Baltimore, Detroit, Philadelphia, and Jacksonville, Florida were among the large cities most affected, according to the study. The older homeowners were enticed into these loans through “special” programs, misleading pitches, or a promise of quick and easy cash. These foreclosures compromised retirees’ “hard-earned generational wealth built in the decades since the Fair Housing Act of 1968.” Lenders often advised older married couples to remove the younger spouse from the mortgage and title, as older borrowers qualified for a larger loan, with actuarial tables showing they have fewer years left. But couples were often not made aware of the consequences of a default, leaving families destitute. The article is a good primer on reverse mortgages.
Seniors and their adult children should be educated about the benefits and pitfalls of loans based on home equity, and monitor any changes in ownership, liens, and title to their real estate. Technology tools can be used to alert owners and family members to issues related to their homes—before their most valuable asset is compromised.