Not many people think about their parents or grandparents being in debt. However, according to the Federal Reserve Americans age 65-years-old to 74-years-old have a faster rate of debt growth than any other age group in the country. Therefore, many older Americans — including those in Tennessee — are dealing with significant financial challenges.
In an effort to get some cash income many older people have turned to reverse mortgages. A reverse mortgage allows a homeowner age 62-years-old and older to get money out of their home. This loan then doesn’t need to be paid back until the person moves out of the home or until the person dies. This type of loan peaked in 2007 and its use has fallen sharply since the recession. For many older people, they have caused a lot of problems.
One new problem is the rate of foreclosure on reverse mortgages. Family members who are inheriting these homes are finding that the companies are trying to foreclose on the homes very quickly after the loan holder dies. This is leaving people struggling to keep their family home just weeks after losing a loved one.
Under federal law, these companies are supposed to negotiate a loan payoff for family members that want to keep the home. However, people claim that companies are not following these rules. People are also finding it difficult to work with the companies to try to keep the houses at all. Many people are simply unaware of how to avoid foreclosure in these situations.
Whenever a family home is threatened with foreclosure, it can be a scary situation for the homeowners. However, people should know that they often have legal rights to protect the home. Particularly in the case of a reverse mortgage, legal remedies may be available to stop foreclosure.
Source: The Boston Globe, “Heirs of reverse mortgage holders may inherit the pitfalls, too,” Jessica Silver-Greenberg, March 28, 2014