In an article published last week, the Minnesota Post delved into the topic of reverse mortgages within the state including negative comments from Minnesota Attorney General Lori Swanson.
Citing a 2009 bill introduced to implement reverse mortgage reforms that was later vetoed by Governor Tim Pawlenty, the article, titled “As state ages, Minnesota braces for problems with risky reverse-mortgages,” examines the case of a couple who obtained a reverse mortgage in which the younger of the couple was removed from the home title in order to qualify.
The couple filed a complaint and received a response from the AG’s office reading: “We are now seeing some of the same brokers whose activity resulted in the subprime mortgage lending fiasco start to sell reverse mortgages as a way to make up for the meltdown in the regular housing market,” according to the article.
The state has received roughly 100 reverse mortgage complaints since 2008, the article states. (This compares with 232 reverse mortgage complaints submitted to the Consumer Financial Protection Bureau on a national level since 2011.)
The article writes:
…The rub for [the borrower] Volgner and for many other couples came with the fact that borrowers must be at least 62 years old to qualify for a federally insured reverse mortgage.
Vognar was 71 back in 2008 when he started looking into reverse mortgages. He was getting ready to retire from his work as a psychotherapist. [His wife] Midelfort planned to continue her part-time work teaching Norwegian language and translating.
With Social Security and savings added to her income, they could cover expenses, but it would be tight. Retired life would be much easier if they could erase their mortgage payments of some $14,000 a year.
Hoping their ticket to that easier life could be a reverse mortgage, they worked the numbers and realized they were sitting on enough equity to cover the mortgage payments.
But there was a catch. At age 58, Midelfort was too young to qualify for the mortgage. The deal would have to be done in Vognar’s name alone, they were told at the offices of Wells Fargo Home Mortgage. In other words, her name would come off the title….
Written by Elizabeth Ecker