According to a recent USA TODAY article, many seniors that took out reverse mortgages are now facing foreclosure. This is even more prominent in African American neighborhoods. So, are you in danger? First, you should know what a reverse mortgage is and how it works.
So, How Does a Reverse Mortgage Work?
A reverse mortgage is a loan. However, the homeowner is 62 or older. If that homeowner has enough home equity, they can borrow against the value of their home to receive:
- a lump sum payment
- a monthly income
- access to a line of credit
- eliminate the monthly mortgage payment
In a reverse mortgage, the homeowner is not required to make loan payments. This is different than a forward mortgage, which is typically used to buy a home. Instead of monthly payments, the entire loan balance will become due if the borrower sells the home, moves away, or if the borrower dies. There are federal regulations ensuring that the loan amount does not exceed the value of the home. The borrower will not be responsible for paying the loan difference in the event it is larger than the home’s value.
Worried About Your Mortgage?
You should know that most reverse mortgages are federally insured. However, there are scams out there that target seniors. These scams have sales pitches that are targeted towards people in need of cash. Also, a reverse mortgage is not a great idea for everyone, so you need to take time to research and/or speak with a qualified professional before making that decision. If you end up using a reverse mortgage, you cannot miss any paperwork deadlines or fall behind on your insurance or taxes, you can end up in a foreclosure.
Reverse Mortgages and Bankruptcy
Are you already in over your head with a reverse mortgage? The good news is that you have options. Bankruptcy is one of them. First, you will need to speak with a qualified bankruptcy attorney to discuss your current financial situation. It is important to meet with an attorney, as some reverse mortgages consider a bankruptcy a breach of contract. This could result in a foreclosure. While this is not common, it is still possible.
Need More Information?
Before you take any action, be sure that you are informed. At the Law Office of Daniela Romero, we believe in relationships that are based on trust. Before we work together, we would like you to get to know us. This is to make sure you are the right fit for us and that we are the perfect fit for you, so that you can be completely comfortable sharing even the most intimate and difficult details of your case with us so we can offer you representation to the fullest extent of the law. Call us for a free consultation to find out the options that will work best for you.