Are elderly adults who still live at home in Oak Park and throughout Chicagoland at risk of foreclosure? According to a recent article in the Chicago Tribune, more and more seniors who have taken out reverse mortgages end up facing foreclosure. Reverse mortgages are designed to provide seniors with income from the equity in their homes so that they do not have to worry about having money to live on during retirement. However, reverse mortgages do not account for the taxes and insurance that remain due on the property, and this is why many older adults with reverse mortgages are now at risk of foreclosure.
To better understand this problem, it is important to learn more about reverse mortgages and how they work.
What is a Reverse Mortgage?
According to a fact sheet from the National Reverse Mortgage Lenders Association, a reverse mortgage is a loan that is available to homeowners who are at least 62 years old. The loan allows that older adult to convert some of the equity in his or her home (from years of making mortgage payments) into cash to use for daily living expenses. The idea is that reverse mortgages can help retirees to benefit from the equity in their homes when they need money to pay for daily needs or for costly medical bills. It is important to note that there is no limit as to how this money can be used—that is up to the individual with the reverse mortgage.
Why is it called a reverse mortgage? In short, mortgages involve a borrower making payments to the lender. In the case of a reverse mortgage, the lender makes payments from the equity to the borrower. The borrower can continue to receive payments from the equity in the home as long as she continues to live in the house, and she does not have to make monthly mortgage payments. However, for a reverse mortgage to work, the borrower does have to stay up-to-date on homeowners’ insurance, homeowners’ association (HOA) dues or fees, and property taxes.
The latter piece of information is where the problem arises for many seniors. In short, older adults who decide a reverse mortgage can help them with their bills end up discovering that they cannot afford the property taxes, the homeowners’ insurance, and when applicable the HOA fees.
Older Adults Face Foreclosure Due to Reverse Mortgage Costs
Reverse mortgages are complicated, and many elderly adults do not realize that they can face foreclosure if they do not meet the terms of the agreement. As the article in the Chicago Tribune clarifies, “an increasing number of seniors are facing foreclosure after taking out reverse mortgages, either because they feel behind on property charges or failed to meet other requirements of the complex mortgage loans.” When this happens, seniors are forced out of their homes, and many do not have another place to live.
The U.S. Department of Housing and Urban Development (HUD) insures most of America’s reverse mortgages. Currently, there are about 636,000 active reverse mortgages, according to HUD. How many of those mortgages could be at risk of foreclosure? In fall of 2016, HUD reported that almost 90,000 seniors with reverse mortgages “were at least 12 months behind in payment of taxes and insurance.” To put that figure in other terms, nearly 15% of reverse mortgage holders may be facing foreclosure.
Contact an Oak Park Foreclosure Defense Attorney
If you have questions or concerns about foreclosure and your mortgage, an experienced Oak Park foreclosure defense lawyer can assist with your case. Contact the Emerson Law Firm to learn more about your options.
See Related Blog Posts: