Gloria Turano, a 90 year old New Jersey woman living in the home her deceased husband, built 60 years ago, thought “…that the undertaker would take me out of here.” Instead, Turano was evicted due to foreclosure.
In 2004, Turano took out a loan through a reverse mortgage lender, Financial Freedom. Her motivation? Her social security allotment wasn’t keeping pace with her annually increasing property taxes. The home at the time was valued at $300,000. She received $104,000 from Financial Freedom after it paid off $60,000 of her line of credit debts. In 2005, she called the salesperson who initially granted the reverse mortgage at Financial Freedom because she knew she needed to refinance the loan. No one at Financial Freedom ever called her back after she reached out to the lender multiple times. By 2012-13 she fell behind in her tax payments.
Reverse mortgages are loan instruments designed for people 62 years and older. Essentially, the lender “loans” the owner the value price of the home. The attraction for the owner on a fixed income is not having to pay monthly mortgage payments on the home. The kicker? The owner must continue paying property taxes and insurance on the home. If the owner doesn’t make those payments, the loan goes into default and eventually, the home goes into foreclosure.
Fannie Mae, a government sponsored mortgage company, bought Turano’s home in 2015 for $100. at a sheriff’s sale after the reverse mortgage lender foreclosed on it. Turano took the case in front of a judge in 2016 but the judge denied her motion. On February 5,2017, Turano had to hand over the keys of the house to Fannie.
A few words to the wise when considering a reverse mortgage. Consult a lawyer before signing on the bottom line of a reverse mortgage loan. Tell a family member or friend that you are considering applying for a loan through a reverse mortgage company. Turano did neither. She was “too embarrassed” to tell anyone, including her son, that she thought she needed a reverse mortgage to help her pay her debts. And she only contacted a lawyer after she was in trouble with late payments.
Interestingly enough, in 2011, one half of the companies that were in the reverse mortgage business at the time, Bank of America, Wells Fargo and Financial Freedom, stopped offering reverse mortgage loans. Why? Falling home values and intricate challenges of assessing an owner’s ability to keep up with taxes and insurance obligations.
As a real estate agent, if you know a homeowner and/or former client who is considering a loan through a reverse mortgage lender, advise that homeowner/client to consult an attorney and a family member before making any kind of decision.