Reverse mortgages: Way out of foreclosure
Pueblo Chieftain, December 28th, 2007
Reverse mortgages used to be a way for homeowners to get extra cash during retirement.
Now they’re also being used for a more-pressing purpose: helping people who are
struggling to meet payments on high-interest-rate loans to keep their homes.
The strategy, which is relatively novel but gaining popularity among legal-aid
attorneys and housing advocates around the country, calls for persuading lenders to take
the cash generated by a reverse mortgage in lieu of foreclosing on older homeowners.
With a reverse mortgage, the bank makes payments to the homeowner instead of the
homeowner making payments to a bank. The loan is repaid, with interest, when the borrower
sells the house, moves out permanently or dies. The products are complex and have high
fees - typically about 7 percent of the home’s value - and they make it difficult
for homeowners to leave the property to their heirs. But they may be the best option for
people who have built up equity in their home and would otherwise lose it.
Most of these older homeowners in trouble had refinanced their home into so-called
subprime mortgages. Such loans - many of which feature adjustable rates that can tack
sharply higher after an initial teaser period - have roiled the mortgage industry and
credit markets this year as default rates have shot up, and analysts expect hundreds of
thousands of additional subprime loans to go bad over the next several years.
Read more of this article.
About Reverse Mortgages: Learn all about reverse mortgages at NewRetirement.com