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.
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.
Russo had not returned a request for comment as of press time.
Written by Elizabeth Ecker