|By Susan Taylor Martin, Tampa Bay Times, St. Petersburg, Fla.|
A reverse mortgage would tap the equity in their
The couple only had to take care of the property taxes and insurance, which totalled barely
"He told us you get paid every month instead of you paying the bank," said Kenny, now 87.
Soon after, their insurance premium jumped so high they could not afford it. They fell behind on their bills. The reverse mortgage company demanded that they pay
The couple now wish they had better understood the seemingly simple reverse mortgage, a frequent lament of homeowners who turn to what is actually a complex financial product. And as increasing numbers of baby boomers become eligible for reverse mortgages, concern looms that many others could find themselves in the same predicament as the Goodnows.
Some will end up fighting to keep their homes.
That's why Fran, 71, was in a
"Mrs. Goodnow, the mortgage company is filing for foreclosure," the judge said. "Is there something you want to tell me?"
—-You've probably seen the TV ads: Actors including
"It allows you to eliminate monthly payments, pay some bills or simply enjoy your retirement," Thompson, also a former U.S. senator and presidential candidate, says in his folksy drawl. "It allows seniors to stay in their homes."
Most reverse mortgages are federally insured loans that enable people 62 and older to turn part of their home equity into cash. The homeowners can take a lump sum or receive monthly payments, or a combination of the two. Either way, they don't make monthly principal and interest payments.
When the homeowners move or die, the amount of the loan and the accumulated interest must be repaid. If there is enough equity remaining, the owners or their heirs can sell the home, pay what's owed to the reverse mortgage company and keep the rest.
The reverse mortgage company is counting on people not staying in the house for too long. Plus, if the house sells for less than what is owed, the
Created by a
Reverse mortgages can be a useful financial tool for homeowners who have substantial equity, intend to live in their homes for many years, and plan to take the cash out over time instead of all at once.
That is not what usually happens, however. Three out of every four borrowers took all of their money up front in a lump sum, according to a 2012 study by the federal
"Reverse mortgages are complex products that are difficult for consumers to understand," the study stated.
The study also found a long-running problem with "deceptive advertising," including solicitations that imply a federally insured reverse mortgage is a government benefit rather than a loan.
Another potential problem: As of 2012, the consumer bureau said, "a surprisingly large proportion" of reverse mortgage borrowers — 9.4 percent — were at risk of foreclosure because they didn't pay the taxes or insurance.
The numbers are particularly high in the
The state's economic woes helped inflate those figures, said
As for who should take out a reverse mortgage, "there's not one right way to do a reverse mortgage or one right person," Madson said. "I think you have to know all the circumstances."
—-The Goodnows bought their house in
A near fatal car accident a decade later left
That's when Kenny noticed an ad for reverse mortgages.
Then, as now, anyone getting a federally insured reverse mortgage must first meet with a government-certified housing counselor who explains the complicated terms. Madson, of James B. Nutter & Co., said the Goodnows would have been required to go through counseling, although neither Fran nor Kenny recalls it.
Because Fran's credit was poor, she was instructed to deed the house over to Kenny, who would then be the sole name on the reverse mortgage.
Blind in one eye, dim-sighted in the other, Kenny signed the paperwork without paying much attention to the terms.
"Neither of us could read all that malarkey," Fran said.
Here's what they agreed to: James B. Nutter & Co. would pay off their existing
They quickly ran into trouble when two different companies cancelled their insurance, first because of hazardous tree limbs on their property, then because they failed to make a payment. A new policy cost more than they could afford.
In 2012, the mortgage company started foreclosure proceedings. Kenny met with a company representative at a mediation session. "They wanted me to pay them," he said, so nothing came of it.
By Tuesday, the Goodnows owed
Kenny was in a nursing home recovering from an infection and severe dehydration.
When the case was called, a lawyer for the mortgage company said Kenny had failed to pay for insurance in 2009, 2010 and 2011. For her part, Fran intended to tell the judge that she and Kenny didn't understand how they could owe so much.
Instead, when Helinger asked if she wanted to say anything, she began to ramble about Kenny's health.
"Mrs. Goodnow, they say you still haven't paid your insurance," the judge gently redirected her.
"I sympathize with your husband in the hospital," the judge said, "but you understand I have to follow the law." With that, he gave the Goodnows until
—-A few hours later, Fran was still trying to accept that she had less than 60 days to find another place to live. With their combined
Fran acknowledges that neither of them could maintain the 1,110 square foot house, which has fallen into an obvious state of disrepair.
The mortgage company likely gambled wrong in loaning Kenny so much on the house, which now has a market value of just
What advice would the Goodnows give anyone considering a reverse mortgage?
"Don't take it!" Kenny bellowed from his nursing home bed. "Unless you are 99 1/2 years old."
"Or," added Fran, "at least until you understand it."
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