KANSAS CITY, Mo. - A growing number of older people are finding themselves in financial trouble due to a reverse mortgage.
A Wall Street Journal article reports that out of the 600,000 outstanding reverse mortgages, 9.8 percent are delinquent. That's up from 8 percent in 2011. The article states the defaults occur when the borrower doesn't pay the taxes and insurance.
Former Kansas City mayor Charles Wheeler has been in the news lately after falling behind with paying property taxes and insurance with a reverse mortgage.
In April, Wheeler called his situation, “... a great embarrassment.”
Before a consumer can take out a reverse mortgage, federal law requires them to meet with a counselor, independent from the lender.
Iran Amani is a financial service specialist with the non-profit organization Apprisen, which helps consumers understand the pluses and minuses of going with a reverse mortgage.
“For the people who are going through the reverse mortgage, they have to remember that they have to pay that,” Amani said.
With a reverse mortgage, you can get a lump sum payment, a line of credit or a monthly payment. The downside can include high closing costs, keeping the home as your primary residence and maintaining your home by paying property taxes and insurance.
For many older consumers, the process can be confusing.
”If you are on a fixed income and the expenses are going to high, that's another thing that you can potentially get behind,” Amani said.
HUD requires lenders to notify borrowers who fall behind that help is available.
Borrowers can contact the National Council on Aging at 800-510-0301 for more information.
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