Better Business Bureau Rep: Beware Reverse Mortgage Red Flags

Through an article written in the Houston Chronicle Thursday, Better Business Bureau’s Monica Russo says reverse mortgage complaints have been mounting, and that borrowers should be cautious. As an “increasingly popular option,” she writes, reverse mortgages can be a valuable tool when used correctly, however. 

Russo outlines her concerns in the article, including marketing practices and non-borrowing spouse problems. 

Russo writes

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Many consumers age 62 or older are “house-rich and cash-poor” – their mortgages paid off, but living on fixed or limited incomes.

For those looking for a way to tap into the equity they have built up in their homes over the years, a reverse mortgage has been an increasingly popular option.

Under a reverse mortgage, the lender sends the borrower money via a lump-sum payment, a line-of-credit, monthly check or a combination of the three. The homeowner is not required to pay back any of the loan advances or interest until the loan term is over.

In theory, the borrower continues to retain title to the home and remains responsible for maintaining the home and paying all real estate taxes. Depending on the plan selected, the reverse mortgage comes due with interest when the borrower moves, sells the home, reaches the end of a pre-selected loan period, or dies.

When the borrower dies, the lender does not take title to the home, but the borrower’s heirs must pay the loan off. Used correctly, reverse mortgages can be a valuable tool for seniors to stay in their homes while tapping into some extra cash.

In recent years, however, BBB offices have been receiving a growing number of complaints from borrowers with allegations of high-pressure sales pitches, hidden fees, misleading statements and unfulfilled promises.

In some cases, widows or widowers have found themselves on the brink of eviction after they were pressured to keep their name off the deed without being told they could be left facing foreclosure if their spouse died.

Read the full Houston Chronicle article

Russo had not returned a request for comment as of press time. 

Written by Elizabeth Ecker

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  • This one of the most unusual explanations for a reverse mortgage.  Some of the information is more than odd. 

    For example, there is at one significant error or issue in each of the following three sentences:  “In theory, the borrower continues to retain title to the home and remains responsible for maintaining the home and paying all real estate taxes. Depending on the plan selected, the reverse mortgage comes due with interest when the borrower moves, sells the home, reaches the end of a pre-selected loan period, or dies.  When the borrower dies, the lender does not take title to the home, but the borrower’s heirs must pay the loan off.”

    Is “in theory” somehow in contrast to “in fact” or “in practice”?  As to title issues is a reverse mortgage different than other mortgages in Texas or do mortgages impact retention of title during the lifespan of the mortgage?  Yes, the sale of the home may be necessitated where the balance due exceeds or is a high percentage compared to the value of the home but does that mean that retention of title is only “in theory”?  And, yes, the borrower on a reverse mortgage may give up some rights during the life of the mortgage to the lender but is that different from other mortgages?  “In theory” is an odd qualifier.

    This is not the first time I have read about an alleged “pre-selected loan period.”  While there is a maximum termination date on a HECM of the one hundred fiftieth birthday of the youngest borrower, what is this pre-selected loan period?  Was this true of some proprietary products in the past?

    The last sentence is a total mess.  There is no thought of nonrecourse despite 12 USC 1602(cc) and it is at termination where title could transfer to the lender either voluntarily (deed-in-lieu-of-foreclosure) or involuntarily through foreclosure.  It is also true that title might never transfer to the lender, it all depends on how the borrower handles termination.  

    Since Ms. Russo wrote the article herself, there is no way that a person with her kind of understanding is qualified to determine if the alleged increase volume in complaints are legitimate.  This is not an attack on her person but rather a statement of the level of her understanding of reverse mortgages based solely on the referenced and linked article, the Houston Chronicle credits Ms. Russo as writing.

    There are sufficient representatives of our industry in Harris County, Texas to reach out to Ms. Russo to help her understand our products and review with her on a redacted basis some of those complaints to determine their reasonable validity.   

    • And what about my complaint that Reverse Mortgage Solutions made false statements to HUD/FHA in order to foreclose on my property? Face the facts! The big money IS NOT in servicing reverse mortgages, but in FORECLOSING on properties. Of course the increased volume of complaints is legitimate. All you have to do is follow the money trail.

      • Mr. Davis,

        This is an odd reply to a comment written over five years ago. What does it have to do with the post above by Ms. Ecker or my comment?

        What about your complaint? From what I can detect your complaint was first written on the Reverse Mortgage Daily website in late 2017, five years after the comment above was written. You mention an increasing volume of complaints as legitimate but what complaints are you referencing?

        Yes, there really is big money for companies which specialize in foreclosures when a foreclosures occur. That is not startling news but rather the costs of the legal system.

        As to your problems with Reverse Mortgage Solutions (RMS), you claim false statements were made but do not specify what they were. If RMS is non-responsive, try arbitration or a lawsuit, perhaps even class action.

        As a former employee of RMS who was employed with them due to a merger and not a direct hire, I terminated my services not long after the merger. Since I have never worked in the RMS servicing department, I have no knowledge about your case and therefore, cannot help you. You need the help of legal counsel, not a CPA.

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