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Seniors Targeted Through Reverse Mortgages Now Face Foreclosure

Posted on July 8, 2019by Admin

An alarming trend is emerging when it comes to foreclosures among the senior population. A number of them have been the victims of reverse mortgage schemes resulting in their homes being foreclosed on. Consumers 62 years of age and older face a unique set of financial difficulties- one of their main concerns is servicing issues with reverse mortgages, according to the Monthly Complaint Report released by the Consumer Financial Protection Bureau (CFPB).

Reverse mortgages allow the homeowner to borrow against the value of their home, receiving money through a lump sum, a fixed monthly credit or line of credit. However, a reverse mortgage does not require the individual to make any loan payments. Instead, the entire balance becomes due when the borrower either dies, moves away permanently or sells the home.

The problem with reverse mortgages is they can be quite expensive and complex if you need to get out of one. Additionally, many lenders put themselves out there as reputable reverse mortgage service providers while offering what are essentially scams to homeowners.

For the most part, the reverse mortgages that elderly homeowners are struggling with come from more than a decade ago when the recession first hit. All it takes is for the homeowner to miss one simple deadline or to fall behind on homeowner’s insurance payments or taxes before the lender moves into foreclose on the home.

Elderly homeowners who are at or below the poverty line and are living in urban areas, have been hit the hardest. USA Today recently published a story regarding reverse mortgages and the effects they have had on the aging population. Their study showed a notable disparity and a trend that subprime lenders tend to target certain areas where the loans are almost always doomed to fail, including fixed incomes and lower income areas.

Miami is one of the cities that has been hit the hardest. Not only does the Miami metropolitan area have pockets of neighborhoods where the population falls below the poverty guideline, it is also an area where many seniors come to retire.

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Choosing the right attorney can make the difference between whether or not you can keep your home. A well-qualified Miami foreclosure defense attorney will not only help you keep your home, but they will be able to negotiate a loan that has payments you can afford. Miami foreclosure defense attorney Timothy Kingcade has helped many facing foreclosure alleviate their stress by letting them stay in their homes for at least another year, allowing them to re-organize their lives. If you have any questions on the topic of foreclosure please feel free to contact me at (305) 285-9100. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Debt Relief, Foreclosures, Timothy Kingcade Posts

New HUD Budget Wording Threatens Reverse Mortgage Protections

Posted on August 15, 2017by Admin

A slight change to the wording in a proposed HUD budget request could lessen the protections of reverse mortgages and increase the risk of foreclosure for some elderly homeowners. The wording change affects 2-year-old provisions in federal housing rules that award certain rights and protections to the spouse of a borrower who takes out a reverse mortgage and later dies.

This wording change could increase the chances that the surviving spouse who did not sign the documents could lose their home in foreclosure.

Senators Marco Rubio (R.-Fla.) and Catherine Cortez Masto (D.-Nev.) sent a joint letter to Ben Carson, the secretary of the Department of Housing and Urban Development, and Mick Mulvaney, director of the Office of Management and the Budget, seeking clarity on the proposed wording in the budget request and asking whether the agency was seeking to reverse the earlier policy change.

The fact that there has been no response from HUD raises concern. Before this change in policy two years ago, a surviving spouse who had not signed the mortgage document often had to pay what was left on the loan in full or was at risk of being evicted, due to the home going into foreclosure.

In the letter to the Department of Housing and Urban Development, the senators referred to the old policy as a “loophole” that had “compounded the stress faced by widows and widowers at a time when they were already grieving the loss of their spouse.”

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Debt Relief, Foreclosures, Timothy Kingcade Posts

Seniors Filing More Reverse Mortgage Complaints with CFPB

Posted on June 7, 2017by Admin

Consumers 62 years of age and older face a unique set of financial difficulties- one of their main concerns is servicing issues with reverse mortgages, according to the Monthly Complaint Report released by the Consumer Financial Protection Bureau (CFPB).

“Servicing problems with reverse mortgages,” topped the list of complaints among consumers at least 62 years of age, according to the report. These problems oftentimes lead to unexpected foreclosure.

The most-cited concerns were “difficulty with changing the loan terms” and “problems communicating with loan servicers.” In addition to mortgage complaints, seniors also reporter difficulty recovering funds after being financially scammed, fees charged for unauthorized add-on products and services, and confusion surrounding deferred-interest and zero-interest credit cards.

CFPB complaints from older consumers were most common in Florida, California, Texas. The three states accounted for nearly 25 percent of all complaints since 2011.

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Credit, Debt Relief, Foreclosures

New Reverse Mortgage Updates Benefit Borrowers and Lenders, according to HUD

Posted on May 13, 2016by Admin

According to a new report issued by the Department of Housing and Urban Development (HUD), the latest reverse mortgage updates on the rules and laws have benefited both borrowers and lenders. New changes to the Home Equity Conversion Mortgage program are intended to: assure that foreclosures and defaults are limited; they are also designed to prevent lender abuse; they help assure that borrowers can actually afford to upkeep the home (i.e. – home insurance and property taxes on these loans that are not secured on the basis of income or credit).

The changes mandate that borrowers demonstrate they have the financial ability to maintain the home and pay the property taxes and home insurance. If the borrower is not able to provide proof of this, lenders are not allowed to approve the loans.

The draw from the loans by borrowers has decreased since the new rules took effect. This lesser draw means a decrease in risk to both lenders and borrowers, and assures (that in most cases) there is something to be passed on to heirs from the estate in the future.

Reverse mortgages are a special type of home loan that is offered to homeowners age 62 and older. They require that you have substantial equity in your home and that you are able to pay annual property taxes, home insurance and general upkeep. There are no income or credit requirements outside of these rules. Other requirements include that the home remains your primary residence and that you seek third-party credit counseling before you take out the loan.

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Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

Reverse Mortgage will likely be modified

Posted on May 12, 2016by Admin

A reverse mortgage payable upon the pre-petition death of the borrower has been modifiable under section 1322(c). Section 1322(c) provides an exception to the anti-modification provision of section 1322(b) in the case of a debt secured by the debtor’s residence when the final payment comes due during the life of the chapter 13 plan.

In re Michaud, No. 14-23406 (Bankr. S.D. Fla. March 29, 2016), Julie Lisana Michaud sought to strip down the reverse mortgagee’s (James B. Nutter & Company) interest in her principal residence to its value at the time of her chapter 13 petition.

The reverse mortgage agreement was entered into by Ms. Michaud’s husband who died prior to her bankruptcy filing. By the terms of the reverse mortgage, the debt became due and was owed upon the death of Mr. Michaud. The agreement further stated that the full debt “if not paid earlier, would be due and payable on May 29, 2095.”

The issue at hand is whether the final payment became due when Mr. Michaud died, as argued by Ms. Michaud, or on May 29, 2095, as argued by Nutter. In the end, the court rejected Nutter’s due date based on “common sense,” finding the 2095 due date to be meaningless as the mortgagor would certainly pass away before that date.

The court also went by the terms of the lending agreement and federal regulations. By the terms of the agreement, the death of the mortgagor accelerates the due date without regard to the date listed in the agreement. Finally, federal regulations, provide that reverse mortgages become “due and payable” when “(i) The consumer dies; (ii) The dwelling is transferred; (iii) the consumer ceases to occupy the dwelling as a principal dwelling.” 12 C.F.R. §226.33.

Nutter countered with a “slippery slope” argument that debtors could use the ruling to their advantage when the debtor has caused the acceleration by his or her own default such as by failure to maintain insurance on the property, which the court rejected.

The court granted Ms. Michaud’s motion to value for a secured claim in the amount of $45,500 plus interest, and an unsecured claim of $67,096.75.

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Debt Relief, Foreclosures, Timothy Kingcade Posts

Updates to the Reverse Mortgage Program Provide Positive Benefits for Seniors

Posted on January 11, 2016by Admin

Recent updates to reverse mortgage laws provide a more secure retirement for Americans looking to borrow against their home after leaving the workforce.

Many retirees have turned to reverse mortgages in recent years to alleviate financial stress. Reverse mortgages allow retirees, 62 and older, to borrow against the existing equity in their home and not have to repay the principal balance or accrued interest until after they pass away. At which point, their home is sold and used to pay off the remaining balance, interest and any additional fees owed to the lender.

The Reverse Mortgage Stabilization Act of 2013 helped retirees who were approved for a reverse mortgage avoid predatory lending. However, many applicants were approved for a reverse mortgage without the lender ensuring the retirees could afford to stay in their homes. Ultimately, many were unable to pay their property taxes, home insurance and other annual maintenance fees, which forced them into foreclosure.

The program’s recent updates will ensure that anyone who is approved for a reverse mortgage is able to pay the bills associated with the property. Although credit scores and income are still non-factors in the approval process, steps will be taken to ensure the insurance, taxes and other fees are paid. Another update to the law allows the non-borrowing spouse to stay in the home if the spouse who borrowed the loan passes away, first.

Experts say the new rules to the Reverse Mortgage Stabilization Act of 2013 will not only allow retirees to stay in their homes longer, but will allow for a more secure retirement.

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Bankruptcy Law, Credit, Foreclosures, Timothy Kingcade Posts

Stricter Requirements for Reverse Mortgages Coming Soon

Posted on April 15, 2015by Admin

Beginning April 27th, 2015, the government is imposing stricter requirements when it comes to reverse mortgages. Reverse mortgages are available to seniors 62 years of age and older whose homes have equity they want to convert into cash. There is no repayment required until the borrower sells the house, moves out or dies. Loan recipients are responsible for paying property taxes, hazard insurance premiums and keeping the home in reasonable condition.

For the past 30 years, The Federal Housing Administration has had lenient standards for reverse mortgages. If a homeowner qualified with their age and equity, they were pretty much guaranteed a loan. The revised application process will be similar to a new mortgage application.

During the recession, many reverse mortgage holders failed to pay the required property taxes and hazard insurance premiums. In addition, the real estate market tanked, creating huge losses on defaulted and foreclosed properties. The FHA’s losses were so significant that the Treasury Department had to provide the Administration with a $1.7 billion bailout in 2013.

As a result, after April 27th, 2015, applicants will be required to demonstrate both the “willingness” and “capacity” to meet their financial obligations before obtaining a reverse mortgage. Lenders will pull borrowers’ credit reports and credit scores, just as they do for home loan mortgages.

Homeowners will have to prove that they have paid their real estate taxes and homeowner association fees on time for the past 24 months. They will also have to show proof of employment, income and other financial assets.

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Bankruptcy Law

More Americans Facing Retirement with Debt

Posted on February 18, 2014by Admin

According to a recent study, the majority of people who contribute to retirement plans, such as 401(k)s, have accumulated more debt than retirement savings in recent years. More troubling is the fact that those approaching retirement- between 50 and 65 years old- had a monthly debt obligation in 2010 equivalent to 22% of their earnings, up 69% from 1992, according to the analysis.

A study by the Center for Retirement Research at Boston College found that the proportion of people in their 60s with debt increased from just under half in 1998 to nearly two-thirds in 2010. Debt as a percentage of assets nearly doubled, from 10% to 18% over that time frame.

Mortgages account for the largest portion of that debt. Older Americans are not only more likely to have mortgages than in previous years; they are also taking longer to pay them off. Some owners enjoy low enough mortgage rates and large enough investment assets to feel comfortable taking out a home equity line of credit to pay for emergency expenses. But in some cases, this is not a good idea. Many financial institutions are encouraging homeowners to look at their houses as a cash machines, with low interest rates. A lot of baby boomers have done this and are now stuck with higher mortgages. To keep debt from derailing your retirement plans, it is important to meet with an experienced financial advisor to manage your post-retirement cash flow.

The typical worker – between 50 and 65 years old- has saved enough for just two years of working income, even though the median post-retirement life span is about 17 years. Balancing debt and saving for retirement starts with carefully measuring what your income and your expenses will be. Many people facing retirement will be on a fixed-income. It is important to make sure that the income streams have the ability to pay your debt.

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If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.