Some lenders that allowed elderly homeowners to take out mortgages without requiring a payoff during their lifetime are now shaking down surviving relations to pay back the loans.
Homeowners older than 62 years of age qualify for a reverse mortgage, which allows them to borrow against the value of their home without being required to pay it back until after their death or when selling the property. Mortgage providers are giving the children of deceased borrowers an ultimatum, however: pay up or risk foreclosure.
Many families are unaware that federal law requires lenders to offer a settlement at a percentage of the postmortem debt, lawyers told the New York Times. In other words, some heirs may opt to foreclose, assuming they owe the full balance.
The Federal Housing Administration declared a moratorium on the standard reverse mortgage at the end of 2012, as previously reported, and the number of such loans decreased to 51,000 in 2012, compared with 115,000 in 2007, according to the Times. Still, about 13 percent of the country’s reverse mortgages underwater, a New York consulting firm, New View Advisors, told the Times. [NYT] — Angela Hunt