I'm fairly skeptical of those reverse mortgages that you see advertised on television (or, at least, you do if you watch a lot of daytime news, the way I do.) The fees are high, and while I understand the appeal of staying in your own home, financially, it looks to me as if you're almost always better off selling the house and using the cash to downsize to somewhere more affordable, than you are betting the bank that you're going to live a long time.
Lenders sometimes encourage only the elder member of a couple to put his or her name on the mortgage because then the payout is greater. Mr. Bennett said he did not realize that his new mortgage had taken his name off the title of the home, which the couple had owned together since 1981.
Mrs. Bennett, who was a decade senior to her husband, died shortly after the new mortgage went into effect. The payments immediately stopped and the mortgage became due and payable.
The lender began foreclosure proceedings and scheduled a sale of the property last month.
The new mortgage, intended to secure this couple's future, instead helped destroy it. They paid $20,000 in fees but received only $1,800 in cash. Meanwhile, fees and interest continue to accumulate. The balance of the loan is now about $300,000, while the value of the property has fallen to about $200,000.The AARP is suing, claiming that the problems stem from a 2008 rule change by HUD; were it not for this rule change, they say, the spouses would be able to stay in the homes until they, too, died.
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