ADVICE

Caught in a reverse-mortgage nightmare

Posted 2/18/13

The U.S. Department of Housing and Urban Development has a birthday gift for 91-year-old widow Jeanette Ogle that should cause any senior to think twice before signing up for a government-insured reverse mortgage.

Later this month, on Ogle’s 92nd birthday, her home in Lake Havasu City, Ariz., is scheduled for foreclosure – not because she did something wrong. Instead, she is expected to lose her house because during a refinancing in 2007, only her husband’s name was included on the reverse-mortgage documents prepared by a loan broker. This was despite the fact that both her husband’s and her names were clearly listed as co-borrowers in the documents for the mortgage being refinanced, Ogle says, and the longtime married couple wanted no change in that status.

But under a controversial policy that is drawing national scrutiny and at least one major lawsuit, HUD – the agency that runs the reverse-mortgage program – insists that when a spouse dies, and the surviving spouse’s name is not on the loan documents, the full mortgage balance becomes due and payable. If a relative or the surviving spouse cannot purchase the house and pay off the debt, the loan may be subject to a foreclosure sale.

Ogle, whose husband, John, died in 2010, says she cannot imagine why she is facing foreclosure. “We did everything we were supposed to do,” she says. “I signed every piece of paper, we followed the rules.” Jeanette and John assumed that the loan they initially took out in 2004 would allow them to do what advertisements for reverse mortgages consistently promise: stay in their home indefinitely, with some extra money for living expenses.

But it’s not turning out that way.

“I just don’t understand why they are doing this to me,” she said in an interview. “I don’t want to lose my home.”

HUD’s reverse-mortgage program, run through the Federal Housing Administration (FHA), has been big business. Promoted on TV by pitchmen such as Hollywood’s Robert Wagner and former Sen. Fred Thompson, there were 582,000 loans outstanding nationwide as of November 2011, according to the Consumer Financial Protection Bureau, which issued a critical evaluation of the program last year. Reverse mortgages are restricted to seniors 62 years or older. The program allows homeowners to tap into equity and pull out money for use in their retirement years. As long as they pay their property taxes and hazard insurance, generally they don’t have to repay any of the money until they move out, die or sell the house.

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