As she was getting on in years and her resources dwindled, Virginia Rayford took out a special kind of mortgage in 2008 that she hoped would help her stay in her three-bedroom Washington rowhouse for the rest of her life.
Rayford, 92, took advantage of a federally insured loan called a reverse mortgage that allows cash-strapped seniors to borrow against the equity in their houses that has built up over decades.
But the risks of the financial arrangement are stark — and today the frail widow finds herself facing foreclosure.
Under the terms of the loan, Rayford can defer paying back her mortgage debt that totals about $416,000 until she dies, sells or moves out. She is, however, responsible for keeping up with other charges — namely, the taxes and insurance on the property.
The loan servicer, Nationstar Mortgage, says Rayford owes $6,004 in unpaid taxes and insurance. If she cannot come up with it, she stands to lose her home in Washington’s Petworth neighborhood.
“I’ve cried a million nights wondering about where I am going to be,’’ Rayford said.
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But tens of thousands of troubled loans remain. More than 18 percent of reverse mortgage loans taken out from 2009 to June 2016 are expected to go into default because of unpaid taxes and insurance, according to the HUD report. That compares with less than 3 percent of federally insured loans that are considered seriously delinquent in the traditional mortgage market.
Joanne Savage, an attorney with AARP’s Legal Counsel for the Elderly, said that seniors like Rayford are the victims of a past system. She joins other advocates who argue that HUD and lenders should work harder to help troubled borrowers facing displacement for relatively small debts compared with the value of their homes.
“There needs to be a little more mercy,’’ Savage said. “We are going to have a steady stream of these clients for five to 10 years.”
Um, what did Rayford do with the “borrow against the equity” part of the reverse mortgage? To me the main issue is elder abuse – this is ripe for lender shenanigans in the same way retirement advisors are always scamming the elderly. But unless we want to make this product illegal I don’t have huge sympathy for “small debts” when you “pulled out all the equity and then your kids spent it all.” Or whatever sad story happened – just like someone in 2004-56 who pulled out the last cent of equity to remodel and take a sweet vacation. How exactly is she supposed to maintain the house if she can’t pay taxes and insurance?
To me the main issue is elder abuse…
I agree, and the abuse can come from all sides.
Loan originators packing extra fees, banks shutting off access to the credit line, and kids spending all the money.
If you get a reverse mortgage,it wouldn’t be a bad idea to cash out the entire amount available, and put it someplace where no one can touch it.
HUD is corrupt.
It’s the poor folks version of nationwide stealing, just like the banks did during the housing bubble. It’s just a lot more difficult to criticize greedy poor folks, but they exist. Besides the widespread bald-faced fraud going on, many states allow folks to collect HUD checks with an income of up to $100K, such as New York State, so the middle-class is at the trough too.
Why should the state pay half your rent, if you’re making $99K a year?!
HUD enablers claim that taking people off HUD, once they begin to make good money, disincentivizes the HUD recipient from increasing their income by seeking better wages.
It’s madness, which is why I don’t mind Ben Carson, with zero experience, being plopped right in the middle of the disfunctional family we now call “HUD.” Often, an outsider can mitigate a messed up family in a way the messed up family would never consider, because.. they’re a messed up family.
Elderly people being booted out of their longterm home because they can’t readily pay a $500 bill on whatever is ridiculous. Managing HUD to provide a safety net for people who have nothing to fall back on but homelessness, instead of propping posts for do*chebags should be it’s limited function. HUD isn’t supposed to function as “my crazy rich uncle.”