A New York woman is fighting with a bank after the reverse mortgage her mother bought in 1997 continued to add charges, including compounding interest, so that the homeowner benefited little from the deal. The bank in this case still has not given her the total amount she owes on the reverse mortgage, which could be as much as $1.6 million, when compared with the actual payouts the woman received of just under $273,000. While reverse mortgages are supposed to benefit senior citizens by providing payouts and delaying repayment, that didn't happen in this situation, so the daughter has now filed a lawsuit. In real estate transactions across the nation, this type of scenario is all too common.
The bank is not discussing the case due to the pending litigation, and the law firm that represents the bank hasn't commented either. The bank tried to foreclose on the home and added interest, legal and other fees. The financial institute claims that some of the money they are owed is half of the value of the home's appreciation, which has grown from about $556,000 in 1997 to an estimated $1.8 million in 2013.
The daughter is challenging the foreclosure due to a lack of documentation and because of the excessive terms of the loan. While most reverse mortgages don't charge such outrageous fees, some did. In another incident, a number of people filed a class action suit for $8 million against the companies that used reverse mortgages to take advantage of others.
A homeowner may initially think that a reverse mortgage will give them easy access to cash and be a quick solution for someone suffering from financial difficulties. A real estate attorney might be able to help clients determine the best solution for them.
Source: TriCities, "The Nation's Housing: A reverse mortgage nightmare", Kenneth Harney, July 29, 2013