Anyone who’s ever watched any late night television has seen those commercials for reverse mortgage. They are always touted by older celebrities claiming how safe these things are. For those who actually believe that there’s little risk to a reverse mortgage, here’s a cautionary tale from our faithful longtime correspondent in Tucson- M.R.:
Recently I passed a vacant house with a NOTS posted on the front fence. I know the owner of this property — she’s an elderly lady who took out a reverse mortgage in 2006.
The NOTS gave the amount, $285,500. Twist, in no way, even during the height of the bubble, was that place ever worth that much. Very few places in zip code 85705 are. Furthermore, the lady was known for feeding every stray cat in the area, and for allowing them into her house. You can just imagine what the place smelled like.
After she got the reverse mortgage, she went on a truly baffling spending spree. We’re talking things like signing up for a coffee bean of the month club, which included an expensive grinder, and she didn’t even drink coffee. (Aren’t reverse mortgages supposed to go to people of sound mind?)
In December 2007, she fell in her shower and broke her leg. After surgery and a stay in rehab, she went to live with her eldest son and his wife. They’re up in northern Arizona. The house was cleaned out, and, boy, did the place need it. The family paid for some fixup work — new kitchen cabinets, new A/C, that sort of thing. The house was put up for sale in June 2008. Listed at about $220,000, and it sat there. And sat there. There was another price cut into the mid-$100,000s.
In February 2009, the "For Sale" sign disappeared, but I didn’t see any signs of a new owner taking the place over. In June, I was at a neighborhood meeting, and the young lady who lives next door said that the house was in foreclosure, and that if someone wanted to buy in, call Wells Fargo.
So, there you have it, reverse mortgage to foreclosure in less than three years.
It’s true that the foreclosure happened after the homeowner moved out- she was not forced out of her home. It hardly seems like it worked out well for the lady or her kids though.