31st Oct 2017


Occasionally, I will have elderly clients walk through the door who have a reverse mortgage on their home.  At the time they took out the reverse mortgage, everything seemed fine and they were excited to receive the money to use on living expenses or to repair a leaky roof, but as everything always does, this excitement went away when they realized the obligations that they had put themselves and their dependants in.


Couples such as these I’ve mentioned are usually told by the mortgage company that they will “never have to make a payment”, which sounds great, but is it?  In a reverse mortgage, you are required to keep paying your annual property taxes and insurance on the home and to keep up maintenance on the home or it is a default in your reverse mortgage agreement, which allows the lender to foreclose on the property.


Sadly, most elderly couples fail to understand their duties under the agreement.  In 2016, the nation’s largest reverse mortgage lender, AAG, was fined $400,000.00 for misleading advertising about reverse mortgages.  Many seniors do not understand the fine print in that volume of documents.  Some wrongfully assume that the mortgage company will pay the taxes and/or insurance on the house.


Many lenders encourage just the oldest homeowner to be listed on the mortgage document as a way to qualify for a larger amount of money without explaining that when the older homeowner dies, the spouse will be required to pay 95 percent of the appraised value of the home or repay the loan in full in order to avoid foreclosure.


The United States Department of Housing and Urban Development (HUD) states that almost 90,000 reverse mortgages nationwide are at least 12 months behind in paying taxes and/or insurance.  Nearly one-in-five reverse mortgages are expected to go into default due to the failure to pay the taxes and insurance.


So what should you do if you have fallen behind on the property taxes?  Often, the best option is to file Chapter 13 in order to pay these taxes over a 3 to 5 year plan where the property is protected by the federal bankruptcy court.  This allows you a little breathing room to become current on the taxes and still keep your home.


If you have one of these mortgage problems, please call me right away to schedule your free consultation where we can discuss the benefits of filing either a Chapter 13 bankruptcy to allow you to keep your home. Please call me at 281-847-4345, or email me at rkemsley@kemsleylaw.com to schedule a free consultation to see how we can help you.  I look forward to hearing from you soon.

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