Foreclosure, Reverse Mortgages, and Chicago Seniors

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.

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Reverse Mortgage Scams Target Elderly Minority Homeowners

According to a recent article in the Chicago Reporter, consumer protection advocates continue to seek justice in Chicago for elderly homeowners who were targeted by a reverse mortgage scam. As the article explains, this particular scam began back in 2009, at the height of the foreclosure crisis, when a Chicago business person named Mark Diamond started orchestrating a reverse mortgage scam that largely targeted elderly African American homeowners in the city. Illinois Attorney General Lisa Madigan has been seeking justice for these victims for nearly a decade, yet many still have not received any form of restitution.

Details of the Reverse Mortgage Scam

Before we get into the details, it is important to understand what a reverse mortgage is and how it works. In brief, as the National Reverse Mortgage Lenders Association website explains, a reverse mortgage is “a loan available to homeowner, 62 years or older, that allows them to convert part of the equity in their homes into cash.” It can help retirees who do not have a lot of cash to make use of the equity in their homes to pay for expenses.

Back in 2009, Attorney General Madigan “filed a complaint on behalf of dozens of elderly black homeowners who alleged that Diamond and other mortgage and home repair companies had stripped nearly $1.3 million in equity from the homeowners,” according to the article. However, most of the victims have not received any compensation. Yet the lack of compensation is not due to a similar lack of court findings against Diamond. Rather, the inadequate compensation concerns the difficulty of actually recovering the money from Diamond’s assets.

In January 2016, for example, Judge David B. Atkins of the Cook County Circuit Court determined that Diamond had violated the Illinois Consumer Fraud Act “by misleading elderly residents into signing reverse mortgages and agreeing to have repair work that was shoddy or never completed.” According to the article, “victims unknowingly signed for loans and were liable for insurance and other fees they could not afford.” For violating the Illinois Consumer Fraud Act, Atkins assessed a civil penalty of $340,000.

Restitution May be Ordered, but Obtaining Money Can be Difficult

In July 2016, Atkins ordered that Diamond pay $2.3 million to compensate 47 different victims targeted in his reverse mortgage scam. Atkins specifically ordered repayment plans to the victims, which ranged from $4,000 to $107,000 depending upon a specific victim’s losses, but the money has not been paid. Madigan’s office has used several tactics to obtain Diamond’s assets in order to provide restitution for his victims, such as issuing citations to Diamond’s family members and to the estate of his wife, as well as to title companies and banks. However, as the article underscores, “getting any money from these efforts will take time.”

Madigan spoke about the limits of restitution—the difficulty of actually getting the compensation to victims—and, as such, the limits of the system: “It is deplorable that he [Diamond] got away with his scheme for so many years . . . .  We have prevented additional people from losing their homes and savings to one of Diamond’s reverse mortgage scams, and my office continues to pursue restitution for those who have already lost so much.”

Seek Advice from an Oak Park Consumer Protection Lawyer

If you have questions about reverse mortgages, consumer protection issues, or foreclosure, an experienced Oak Park consumer protection attorney can help. Contact the Emerson Law Firm today to discuss your situation with a consumer protection advocate.

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