Two Very Different Views of Reverse Mortgages

NewImage.jpgThe Ventura Star reported on two different views of reverse mortgages over the weekend.

That article describes the view of Joan Locke, 72, who considers her reverse mortgage a blessing then provides the opinion of Sandy Jolley, 63, who says her mother’s reverse mortgage a curse.

Lock, who retired at 62 to take care of her husband who suffered from a tumor pressing on his brain, the couple was having a hard time making it on about $2,000 a month.  After learning about reverse mortgages through a seminar on financial planning, she decided to take out the loan.

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After paying off her mortgages, she feels she will not be a burden on her two sons.

“I can still live in my house as long as I am able to maintain it,” she said. “There will be nothing left over for my sons … It’s kind of like living on my children’s inheritance. It was something none of us foresaw.”

The view of Jolley, a family member of Pat Hickerson couldn’t be more different.  Her mother took out a reverse mortgage with Financial Freedom and believes the company ignored signs that her father, Richard Hickerson, was mentally impaired and on heavy medication when he signed the reverse loan application in 2005.

Jolley claims her parents didn’t need the money and that Financial Freedom should have known that.  Now, her mother’s Alzheimer’s disease has progressed to the point that she needs to be in a care facility, but because of the terms of the reverse mortgage, Hickerson must stay in the home or lose it.

Selling the house isn’t an option because the house won’t command what it did when they got the loan, and the family can’t afford to pay the lien on the house, which is $470,000, Jolley said.

Interesting read – even though you might not agree with all the opinions in the article.

Go forward on reverse mortgages carefully, experts warn

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  • There are no real surprises in the article. While acknowledging the existence of counseling, some of the opponents to reverse mortgages ignore its function except to point out that the GAO criticized it last year.

    The article states: “Marty Bell, NRMLA senior vice president of communications, described a reverse mortgage as a government-insured program for people 62 and older who have some equity in their homes and no other liens on the house. ‘It is like a home equity loan in reverse,’ Bell said. ‘You are borrowing against the equity in your home, but instead of being paid back on a monthly basis, the principal does not have to be paid back until you move out of the home or die,’ he said.”

    What is Marty talking about? “…no other liens on the house… like a home equity loan in reverse?” It seems Marty has not learned the basic lesson of not speaking on things one has little knowledge on. I had a client with bail bonds as liens against the house from her activity as an investor in a bail bond company. It took months and months to deal with them but if those liens could not stop a HECM then what liens is Marty talking about?

    What is a home equity loan in reverse? Has Marty never heard of negative amortization? If the home equity loan is really in reverse, then the line of credit is available to the bank, not the home owner. I thought we were done with this cutesy and misleading lingo. Peter, please, help out; this is not helpful stuff.

    Although no fan of Suze Orman, she seems to have issued her most pessimistic view yet on reverse mortgages in this article. Ms. Orman seems to be swayed like a willow branch by the wind.

    Rereading the Hermina Brunson decision from last year, the New York Supreme Court did not view HECM counseling as much of a consumer protection at all. Counseling has been modified to incorporate some of the more problematic pieces of the decision but it is doubtful if even current counseling would withstand the thorough lambasting of the judge. None of the criticism of the judge had anything (not even one itsy bitsy iota) to do with a lack of FIT and BCU. I think HUD needs to reconsider this case and readdress the education portion of counseling once again to upgrade it yet further. It seems the judge may have wanted a digital recording of counseling as recommended by the “California Gang of Three” in the latest Consumer Union report on reverse mortgages but that seems a little too over the top.

  • It’s interesting that they don’t state any benefits that the Hickersons got out of the Reverse Mortgage. What happened to money from the five years of mortgage payments that they didn’t make? If her parents didn’t need the money, where did it all go? $470,000 is a lot of money. They could have used it to buy longterm care insurance or saved it for that purpose.

    They also should have noted that if she believed her parents’ judgments to be so impaired, then she should’ve got involved sooner and become POA. Hindsight is always 20/20.

    • dleighton2,

      They provide opposition, not contradictions to their own position. No one has accused them of being fair or unbiased. They make no such representations.

      Maybe you can provide the research on the questions you ask? Also check with NRMLA, they have looked into this and a number of other cases. If you or your firm are not members, become one and get your questions answered.

      • Ms. Jolley,

        I want to personally thank you for your response.

        It is clear that dleighton2 does not understand the difference between the lien amount and the current balance due. When did your parents get the loan and what is its current balance due? It seems it was taken out in 2005 and had a starting balance due of around $100,000.

        Some talk about $25,000 in upfront fees but no doubt part of that is the servicing fee set aside. How much was that? What were the total of the upfront costs without the servicing fee set aside?

        All I have ever read is that $80,000 in cash was taken out of the loan. Was it to pay off an existing mortgage? Was it used for anything else? Did they borrow more?

        I know Mr. Peter Bell has expressed regret over your situation. Can you please make us clear what it is?

        I have lost close friends due to the affliction that troubles your mother. I pray you will be comforted in the midst of such pain. No one can fully appreciate what you go through daily.

    • Hello – I tried to reply to you yesterday but apparently my reply didn’t get printed. My parents asked me to live with them in 2001 to help manage their day to day living. In 2005 an unscrupulous salesman came into their home while I was at work and sold them a reverse mortgage they didn’t need. He told my parents not to tell me about the reverse mortgage until after it was signed. My parents had almost 200,000 in their investment portfolio, 60,000 cash in the bank, a $650.00 monthly mortgage payment made from investment interest, and a monthly income double that of their expenses. My father had advanced liver cancer and a metastatic brain tumor that had been treated with radiation. My father died one month after signing the contract. My mother was diagnosed with Alzheimers in 2002 and couldn’t make change for a twenty dollar bill. What my parents got from the reverse mortgage was 81,000 one time cash payment for their home worth 530,000 and payoff of the 121,000 traditional mortgage. For this they were charged more than 25,000 in fees and costs for a beginning loan of 228,000 and a lien of 470,000 on the property. I have been the full time caregiver for my mom for the last 5 years (having to stop working to care for her). It costs more than 60,000 a year to care for an alzheimer’s patient. You ask where the money went – well the 80,000 stayed in my moms bank account for 8 months untouched and then was used for her care and benefit since. If you want to know the full story google sandy jolley reverse mortgage. Sandy Jolley

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