NewRetirement Retirement News Digest : Retirement Pitfalls

4 ways to face a cash-strapped retirement

jberman — Sat, 21 Nov 2009 10:30:00 GMT

Bankrate, November 20th, 2009

Dear Debt Adviser,
Help, I'm about $30,000 in debt. I have about $50,000 in my retirement. I will be 59½ years old in January. I had to go on disability from a fall at work. My house is paid for. Should I just take money out and pay off my loan? Could I just hire someone to (advise me)? I don't know what to do and am at my wits' end. I am not behind on any bills.

Dear Doris,
You worry me. You are nearly 60, have saved little and spent much. Now you are out of work and ask me if you should hire someone? My suggestion is that you get rehired as soon as possible and develop a plan for building up your savings, paying down your debts and preparing for retirement.

Before you say, "I don't plan to retire for a long time," consider that many people end up having to retire before they plan to due to illness, injury or job loss. You may be late getting started on a financial plan, but I suggest that you put one together now before it's too late!

Let's start with these four major moves:

Begin by setting some realistic goals, such as when you want to retire and how much you will need to do it.
Put together a budget that will allow you to save the money needed to meet your goals and begin to pay down your debt.
Find a financial planner to do some serious retirement planning.
Consider how you can use the equity in your home for debt repayment and retirement planning.

You can get help with all of these tasks and it shouldn't cost you anything. A credit counselor can help you with goal-setting and budgeting, a financial planner should do a review of your finances and make suggestions and a local banker can help you understand what options you have for tapping the equity in your home.

As you are only three years away from 62, I especially want you to look into how a reverse mortgage might fit into your plans. Simply put, a reverse mortgage provides a monthly payment to you that extends your income while you stay in your home. Most reverse mortgages require you to be at least 62 years old.

You asked if you should use your retirement money to pay off your debt. I don't recommend that you tap into your retirement money at this point. If your disability is permanent, then you need to rebalance your budget to assure that your monthly expenses can be met with your disability income. Should your disability not be permanent, the sooner you can get back to full salary, the better.

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Ask the Experts: Do your homework on reverse mortgages

jberman — Thu, 29 Oct 2009 01:35:00 GMT

Sacremento Bee, October 28th, 2009

Our three new "Ask the Experts" writers have been busily answering financial questions this month from online readers.

Here's a sample of their advice on personal finance, wills/estates and investing.

To see more questions or to get advice from our other financial experts on taxes, banking and investment clubs, go to: www.sacbee.com/ask.

Pamela Christensen, Certified financial planner

I expect to retire in about four years and will have a small Sacramento County retirement. We also have about $150,000 in CDs to live on. My parents got a reverse mortgage a couple years ago for the extra cash to live on and to have no mortgage payment. It seems to be working for them and we are considering it as well. Is this type of mortgage safe?

As with most financial planning, these issues are very individual. I like reverse mortgages in some situations, although it's always wise to get lots of counsel on your particular circumstances and the ramifications. For instance, do you have heirs in line to inherit your house? Do they want or need it? How much equity do you have in the home?

Do your homework and learn as much as you can. Start by going to the federal Department of Housing and Urban Development Web site (www.hud.gov) and search for "Reverse Mortgages." There's also information on the state Department of Real Estate Web site (www.dre. ca.gov). Click on "Consumers", then "Home Buyers/Borrowers," then "DRE Publications and Resources." Talk to your estate planning attorney and other financial professionals to get their opinions. Talk with family and friends only if you know they are well educated in reverse mortgages.

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Action Line: You've got phony mail

jberman — Wed, 28 Oct 2009 01:13:00 GMT

San Jose Mercury News, October 27th, 2009

San Jose scam alert: The city has issued an alert for an "elder financial abuse scam."

Because of limited income, senior citizens are more vulnerable to scams that offer them quick rewards, and overseas crooks are striking here and probably elsewhere, too.

The city's senior citizen residents have been targeted in a mail and Internet scam, officials say in an alert.

The method: false sweepstakes letters that are flooding the San Jose area.

These scammers send out millions of these tempting dispatches promising unexpected riches.

Reason: these scams work. People fall for them and the crooks walk off with hefty profits. The city's alerts says, "Letters and e-mails addressed to senior residents claiming to award a sweepstakes prize are turning up with increasing frequency both in the mail and over the Internet.

"Several San Jose senior residents have reported receiving these letters recently and have inquired about them at senior and community Centers.

"The letters bear the logos of Reader's Digest and Pepsi and purport to award a $1 million 'Grand Prize Giveaway.' The letters ask recipients to send a check to cover the administrative costs of processing the prize.

However, when the resident attempts to cash the enclosed 'certified check,' it is refused due to insufficient funds."

This is common scam. It has many faces: you have won a lottery, we need your help, we can fix your credit card problems.

Read more of this article.

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Reverse-mortgage boom raising concerns on potential pitfalls

jberman — Sat, 10 Oct 2009 09:45:00 GMT

Chicago Tribune, October 8th, 2009

A national consumer advocacy organization added its voice Tuesday to a growing chorus of concerns about the rapidly growing popularity of reverse mortgages, comparing the loan product's potential pitfalls to subprime mortgages.

The National Consumer Law Center said the aggressive marketing techniques being used to sell a complicated financial product to potentially vulnerable senior citizens requires the adoption of new consumer safeguards and industry standards.

"These problems are eerily similar to those that drove the subprime boom," said Tara Twomey, an attorney with the Boston-based center. "This market could be another financial fiasco."

In recent years, the popularity of reverse mortgages, particularly the federally backed Home Equity Conversion Mortgage, has jumped as strapped homeowners look for additional financial sources. In an HECM, a homeowner 62 or older can borrow funds against the equity in the home. The loan and the accrued interest do not have to be paid back until the homeowner sells the property, dies or fails to live there for one year.

Last year, more than 112,000 seniors used reverse mortgages to tap more than $17 billion of home equity.

The number of loan providers has swelled as demand for the product has grown. More than 2,700 lenders offer reverse mortgages, including 1,500 lenders who originated their first HECM last year, the center's report found. The top three lenders were Financial Freedom, Wells Fargo Bank and Bank of America.

Twomey acknowledged that most of the center's concerns are based on data that is "anecdotal at this point" and that there were no statistics to quantify how many reverse mortgage loans were made inappropriately.

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Lesson: The best-laid retirement plans melt down

jberman — Thu, 24 Sep 2009 07:52:00 GMT

Associated Press, September 24th, 2009

Planning for retirement has never been as complicated — or as important — as it is now.

Last year's financial meltdown was the second stock market disaster of the decade. Millions of baby boomers saw their savings wither, just when they were eyeing retirement.

The collapse of the stock market had much less impact on people in their 20s and 30s. They had less to lose and have plenty of time to recover. For many others, though, the decline in 401(k)s and other investment accounts will force them to make difficult choices. Many will work longer than they expected. Others will forget about buying a second home in retirement or traveling as much as they had planned.

David Rothberg, 56, an ophthalmologist in Palm Harbor, Fla., once planned to retire when he reached 55. When the dot-com bubble burst in 2000, he lost more than half his savings, and pushed back retirement to the age of 60. Then came the market crash last year. His new target is 62, six years from now.

The crash and its effect on baby boomers highlight the risks that came with the revolution in how people finance their retirement.

For decades, a company pension was the key to the good life. With a defined-benefit pension, workers contribute nothing and receive a guaranteed monthly payment, or a lump sum at the start of retirement. Since 1980, pensions have been gradually replaced by 401(k)s. These are tax-deferred savings plans in which workers, and sometimes employers, make contributions and the retirement payoff depends how well the money was invested.

The number of families with only a company-provided pension fell from 40 percent to 17 percent from 1992 to 2007, according to one study. Those with a 401(k)-type savings plan reached nearly 80 percent from 32 percent.

"We've moved so much of the burden of saving onto the individual worker," says Blaine Aikin, CEO of Fiduciary360, which offers advice on overseeing retirement plans. "We also expect them to be able to manage it in a situation where even the professionals were baffled."

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Five ways to make your nest egg last a lifetime

jberman — Tue, 22 Sep 2009 07:15:00 GMT

Marketwatch, September 17th, 2009

Back in the good old days, before the crisis of 2008-09, many experts suggested that all you needed to do was withdraw 4% per year, adjusted for inflation, from your nest egg. That strategy, experts said, was a near guarantee that your nest egg would last a lifetime.

Well, go tell that to the guy selling apples and pencils on the street corner.

Yes, conventional wisdom has proven to be more conventional than wise. And now everyone is trying to figure out the best way to turn a nest egg into an income stream that will last throughout retirement. And that includes AARP, which this week released two tip sheets that "challenge conventional thinking and offer general guidance about how to make the best decision for you and your circumstances."

One of the tip sheets, "Making Your Nest Egg Last a Lifetime," which was written by Anthony Webb of the Center for Retirement Research at Boston College, suggests the following:

1. Delay claiming Social Security

Retirees and would-be retirees need to consider matching their fixed and, best-case, inflation-adjusted sources of income against their fixed expenses. And one way to create the best inflation-adjusted source of income at the moment is to delay taking Social Security for as long as possible, certainly at least until your full retirement age if not longer, said Janet McCubbin, director of financial security at AARP's Public Policy Institute.

At the moment, many people claim Social Security -- even though it means a reduced benefit -- at age 62, using the faulty logic that they may not live past the so-called break-even point. The break-even point is the date at which the sum of your reduced early benefits no longer exceeds what you would have drawn with the heftier, delayed benefits. (There are plenty of Wed-based calculators to help you figure your break-even age.)

Read more of this article.

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Are fees draining your 401(k) retirement savings?

jberman — Wed, 26 Aug 2009 09:26:00 GMT

USA Today, August 25th, 2009

Quick question: How much are 401(k) fees removing from your retirement nest egg each year?

If you are either unaware of such fees or don't know their amounts, don't worry: Nearly 83% of Americans don't know, either, according to AARP.

But the coming months may change that.

Congress and the Department of Labor are working on legislation and regulation that would require employers to disclose more information about administration and management fees in an understandable way. And an independent website, Brightscope.com, seems to be gaining traction as it aims to provide workers with company 401(k) plan ratings that include fee information.

More workers are relying on 401(k) plans for retirement funding, as pension plans are frozen or no longer offered. The recession and stock market losses battered 401(k)s over the past year. But associated fees — often hidden or extremely confusing to find and understand — haven't helped.

"When money is going in every month, it's hard to keep track of the fact that your account balance might not really be growing," says Rebecca Davis, staff attorney at the Pension Rights Center. "Participants need to know that they are saving for their own retirement and not just funding the income of a third-party administrator."

The assortment of fees can suck thousands out of your 401(k).

Suppose your account with a balance of $20,000 earns 7% a year, with fees equal to 0.5% a year. Over 20 years, the balance would be worth about $70,000, according to a report from Congressional Research Service. Were the fees 1.5% a year — near the industry median, according to the Investment Company Institute, or ICI — the balance would amount to $58,000, or 17% less.

All sorts of fees exist, and it can be hard to determine whether workers or employers are paying them. Administrative fees pay bookkeepers, trustees and legal advisers; management or investment advisory fees pay those who operate and invest in mutual funds; and distribution fees, or 12b-1 fees, are charged by certain mutual funds.

Fee amounts vary considerably, especially depending on the plan's size.

Read more of this article.

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Avoiding The Identity Theft Underworld

jberman — Wed, 19 Aug 2009 09:43:00 GMT

Forbes, August 18th, 2009

The U.S. Department of Justice is indicting a Miami man for working with two co-conspirators in Russia to steal 130 million credit and debit card numbers between 2006 and 2008. Breaking into the network of a payment systems company, the criminal enterprise was able to get the numbers from customer transactions at convenience stores, grocery stores and other retailers.

Cybercrime, which includes viruses, bots and phishing scams, has evolved from a nuisance to an extreme danger as global crime rings profit from online identity theft. Young hackers showing off their skills have been supplanted by an organized and underground criminal community. These bad guys understand business and technology, and they are just as structured as legitimate companies, using networks, staff and money laundering processes to earn money from stolen identities.

Identity thieves operate in a digital world that is largely beyond the reach of government and law enforcement agencies. While there are laws in many countries that protect against cybercrime, it can be difficult to determine prosecutorial jurisdiction, as many organized crime rings have operations around the world. For example, a phishing site might be registered in Russia to a person in China who is targeting Americans. Policing duties get murky.

Developing countries, such as Russia and China, are responsible for a large portion of the world's malware, spam and viruses. These countries are experiencing rapid growth in skills and technology that are outpacing laws and enforcement. Because labor is cheap and legitimate technology jobs are scarce, highly skilled whiz kids are turning to cybercrime to make real money by masterminding schemes to steal credit card and Social Security numbers

Read more of this article.

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Protecting Seniors From Reverse Mortgages

jberman — Fri, 10 Jul 2009 02:30:00 GMT

California Progress Report, July 8th, 2009

Just as Congress grapples with the Wall Street, banking and subprime mortgage mess, California’s legislature is attempting to reshape state laws governing the financial services industry, hoping to avoid a future fiasco a la subprime. Its success is likely to be mixed, at best. This is the first in a series of posts that will lay out issues and the status of bills seeking to overhaul state law on banking and lending.

You may have seen them advertised outside bank buildings, on the Internet or, if you’re over 62, perhaps via an unsolicited postcard. They’re called reverse mortgages or, officially, Home Equity Conversion Mortgages. And they’re growing fast as the population ages, and lenders and brokers seek out new, lucrative products in the post-sub-prime world.

Two bills in the legislature, AB 329 by Assemblyman Mike Feuer (D-Los Angeles) and SB 660 by Sen. Lois Wolk (D-Davis), are designed to protect senior citizens, the targets of these loans. While advocates for senior citizens are pushing for passage of the bills without further amendment, lobbyists representing companies that offer reverse mortgages seek to block or water the bills down. The fight shows that despite bail-outs and the subprime meltdown, the banking industry remains a powerful force in Sacramento.

“The banking lobbyists are frantic,” said Prescott Cole of California Advocates for Nursing Home Reform, the bill’s sponsor, after SB 660 narrowly escaped death in Monday’s hearing before the Assembly Committee on Banking and Finance. The bill passed 6-3, with the last two aye votes coming in over an hour after bills were heard.

Reverse mortgages can be useful for some older people. They provide a way for homeowners aged 62 and older to turn equity in their homes into hard cash for immediate needs. The loans come due when the homeowner dies or sells the house.

The trouble with annuities

jberman — Thu, 02 Jul 2009 04:33:00 GMT

CNN, June 30th, 2009

With the uncertainty of the market these days, a lot of investors are running for cover with their retirement funds. No wonder sales of fixed annuities surged 74% for the first three months of 2009, according to research association LIMRA.

These insurance products provide tax-deferred growth at a fixed rate - higher than that of CDs now - with the option to later turn the money into guaranteed income for life. It's a compelling pitch. But there's a costly catch. Getting into a fixed annuity today may force you to miss better opportunities tomorrow.

Know what's being sold

First, a clarification - because the world of annuities is anything but clear. The term "fixed annuity" typically refers to a deferred annuity. That's different from an immediate annuity, for which you turn over a lump sum to an insurer and start getting regular payments within a year. Deferred annuities are more like CDs; in fact, insurers often promote them as a higher-yielding alternative.

Aimed at retirees and pre-retirees, deferred annuities may promise a high teaser rate - based on prevailing interest rates - in year one, then readjust yearly based on market conditions, with a guaranteed minimum. Or they may offer a more modest fixed rate for longer. For example: In May, Mutual of Omaha offered 4.65% the first year for contracts of $100,000 or more, with 3.65% in years two through five. (That's compared with an average of 2.19% on a five-year CD at the time.)

While there's no term on either type of contract, you're hemmed in for five to seven years by surrender fees, often around 7% initially. (Some do allow yearly fee-free withdrawals of up to 10% of the account value, however.)

Read more of this article.

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Retirees may well worry about health-care reform

jberman — Fri, 19 Jun 2009 00:38:00 GMT

Marketwatch, June 16th, 2009

If things weren't bleak before, they certainly are now. Men and women retiring today will need truckloads of money to pay for health-care expenses over the course of their retirement, according to a new study.

And that was the case long before we learned that President Barack Obama plans to cut $313 billion in Medicare and Medicaid spending and reform this nation's health-care system. It's anybody's guess what retirees might need if those reform plans become a reality.

For the time being, at least, the reality is this: Men retiring at age 65 in 2009 will need from $68,000 to $173,000 in savings to cover health-insurance premiums and out-of-pocket expenses in retirement if they want a 50/50 chance of being able to have enough money, and $134,000 to $378,000 if they prefer a 90% chance, according to a study published last week by the Employee Benefits Research Institute.

Meanwhile, women -- with their greater longevity -- will need even more money. A women retiring at age 65 in 2009 will need from $98,000 to $242,000 in savings to cover insurance premiums and out-of-pocket expenses in retirement for a 50/50 chance of having enough money, and $164,000 to $450,000 for a 90% chance, said Paul Fronstin, an EBRI researcher, in the report. Read the report on the EBRI site.

But it gets worse. Many Americans may need even more money than the amounts cited above, Fronstin said, because his "analysis does not factor in the savings needed to cover long-term care expenses, nor does it take into account the fact that many individuals retire prior to becoming eligible for Medicare."

Simply opening one's eyes to the issue is key, said Stephen Huth of CCH Inc., a Riverwoods, Ill., publisher and unit of Wolters Kluwer. "Just knowing this is a problem is a good first step," he said. "Few individuals plan for retirement at all, and a small percentage of those even think about health-care costs.

"Even with all the talk about health-care reform, little has been said about the looming crisis for many older individuals," he said.

Read more of this article.

Mortgage crisis robbing seniors of golden years

jberman — Sat, 06 Jun 2009 04:24:00 GMT

USA Today, June 5th, 2009

Howard Weiss is 77 and scared.

This year, the semiretired distributor from Phoenix ran into financial problems and stopped making his mortgage payments. He was told his home was scheduled for a foreclosure auction in May.

So Weiss scraped together more than $2,000 to stave off the foreclosure. He's still trying to figure out if he can get a mortgage modification so he can afford his home.

"This is the biggest mess I've had in my life," Weiss says. "I could break down and cry. I was about to lose everything. I've been through (the Korean War), through a lot of crises. Now I've turned everything over to the Lord. ... I'm so stressed this is going to kill me."

The worst economic crisis since the Great Depression has slashed home values and triggered an unprecedented surge in foreclosures across the nation. It's also taking an especially harsh toll on an often overlooked demographic: seniors who are retired or nearly so.

Conventional wisdom holds that most seniors have paid off their mortgages or have significant equity in their homes, but in reality hundreds of thousands are suffering in the housing crisis.

This population is being hit on all fronts. More than 600,000 seniors are delinquent or in foreclosure, according to AARP. A separate report by AARP found that 25.5 million seniors ages 50 and older have a mortgage. Unlike younger people, many are on fixed incomes and lack the money or job opportunities to catch up on payments when they fall behind.

Some seniors have been victimized by predatory lenders or made bad financial decisions, taking on adjustable-rate mortgages that reset to payment levels they couldn't afford. For others, their mortgage problems grew out of other financial pressures, such as staggering medical bills or helping adult children through financial difficulties.

Read more of this article.

Police officers work to help senior citizens avoid common scams

jberman — Fri, 29 May 2009 01:29:00 GMT

Chicago Tribune, May 27th, 2009

Arlington Heights Police Officer Doug Hajek is a connoisseur of scams that target the elderly.

One currently making the rounds involves someone who pretends to be a grandchild stranded in Canada and needs money wired for a ticket home. More common are the home-repair con artists who distract a home owner outside while an accomplice ducks inside and steals valuables and cash.

"Those things kind of go in waves," said Hajek, who is among a number of officers throughout the northwest suburbs who focus on trying to help the elderly from becoming victims of crime.

Regular visits to retirement homes are part of the assignment. In Schaumburg, for example, police participate in a discussion on the fourth Wednesday of every month at the Schaumburg Barn, the village's senior center, Police Sgt. John Nebl said.

"Any time senior citizens are crime victims, an officer will visit their house," he said. "We try to assist them so it doesn't happen again."

Elgin Crime Prevention Specialist Cherie Aschenbrenner's sole responsibility is to help the city's senior population.

"They trust me, and they want me to look at stuff, which makes me feel good because I know they've been listening," Aschenbrenner said.

During a recent talk she gave at the Greens of Elgin retirement community, several residents showed her solicitation letters they had received.

The come-ons are often tempting, said Lisa Wiethorn, one of the residents.

Read more of this article.

2 Firms Accused of Fraud in Debt Settlement

jberman — Fri, 22 May 2009 01:16:00 GMT

The New York Times, May 19th, 2009

The New York attorney general, Andrew M. Cuomo, sued two large debt settlement companies Tuesday, saying they had engaged in fraudulent and deceptive business practices and false advertising.

The suits seek to enjoin the companies, Nationwide Asset Services and Credit Solutions of America, from many of their business practices, including charging customers before any settlement work is done. They also seek restitution and damages for dissatisfied customers.

“These companies claim to be the light at the end of the tunnel, but time after time they have shown that they only add to the burdens of Americans dealing with debt,” Mr. Cuomo said in a statement.

Credit Solutions enrolled 18,000 customers in New York State in the last five years, earning $17 million in fees, but settled the debts of fewer than 2,000 of them, the attorney general said.

Nationwide signed up 1,981 New York residents in three years, the suit against it says, but only 64 completed the program. Twenty-seven of those ended up paying more than they originally owed because of Nationwide’s fees, the suit alleges.

Mark Walling, a lawyer for Phoenix-based Nationwide, said he had not seen the suit. “My client denies any wrongdoing,” he said.

Read more of this article.

Older Borrowers, Out in the Cold

tsaleen — Sun, 26 Apr 2009 17:50:00 GMT

The Wall Street Journal - April 14, 2009

YUBA CITY, Calif. -- In 2006, Carol Couts, a 66-year-old widow in Yuba City, Calif., was living in her home, payment-free, when a mortgage broker persuaded her to refinance her no-cost mortgage for one that exceeded her monthly income by more than $400.

She can't afford the payments, and unless her lender modifies the loan to make it affordable, she'll lose her home of 25 years. She's given away most of her furniture and her cat, and packed her belongings in cardboard boxes. "We've got nowhere to go," she says, referring to herself and her dachshund, Ollie.

As the government presses lenders to modify mortgages, a large subset of distressed borrowers is being left out: older homeowners on low fixed incomes. Many of them are now facing foreclosure, say legal-aid advocates and AARP attorneys, because they were sold loans they could never afford, often fraudulently.

Many of these homeowners had lived for decades in their home and had built up substantial equity, but had low incomes. This made them tempting targets for brokers who persuaded them to refinance their mortgages, telling them they could lower their monthly payments. Instead, many of these loans were loaded with fees and exploding interest rates and quickly became unaffordable.

These borrowers' incomes are often so low -- many are living solely on Social Security -- that few qualify for mortgage-relief programs. Even if lenders agree to reduce the interest rate and stretch out the repayment period, strategies at the heart of the Obama administration's antiforeclosure guidelines, "they won't get payments low enough," says Tara Twomey, an attorney with the National Consumer Law Center.

Hundreds of thousands of people in once-hot markets such as California's Central Valley fall into this camp, say housing counselors. Often the only way to keep these people in their homes is if lenders rescind the fraudulent loans or reduce the principal, steps most are unwilling to take.

The U.S. House of Representatives has endorsed legislation that would allow bankruptcy judges to modify or rescind loans even if lenders are unwilling. But lenders oppose the measure and the legislation has stalled in the Senate.

Meanwhile, people like Mrs. Couts are facing foreclosure. After her husband died in 2005, she took out a reverse mortgage, a deal available only to people 62 or older with substantial equity.

With a reverse mortgage, a bank makes payments to a homeowner, and the homeowner keeps control of the house and doesn't have to pay back the money as long as he lives there. The loan is repaid, with interest, when the borrower sells the house, moves out or dies.

The arrangement enabled Mrs. Couts to stop making mortgage payments so she could afford to remain in her home on her $913 a month in Social Security.

In 2007, she received numerous phone calls from a mortgage broker named Daniel Lewis. According to Mrs. Couts, he told her he was contacting seniors to warn them that banks were canceling reverse mortgages because they were unprofitable. She would have to refinance her home, he told her, or lose it. (This wasn't true; reverse mortgages generally aren't repayable until death.)

Mrs. Couts signed a document that said she could cancel within three days, and also signed documents that she thought were for a 30-year conventional loan with low monthly payments. The next day she saw that the application listed her income as $5,075 a month. She called Mr. Lewis to point out the error and to cancel the loan, but says he told her it was too late to change anything.

The broker had used a "no doc" application, which doesn't require proof of income. Many brokers used these stated-income applications when borrowers' incomes were too low to qualify them for loans. All of the other boxes for listing income and assets in Mrs. Couts's application, which was obtained by The Wall Street Journal, were blank.

Mrs. Couts's first statement showed she had an adjustable-rate mortgage with an initial interest-only monthly payment of $1,333. She soon defaulted, and Wachovia Corp. -- which had acquired World Savings & Loan, the firm Mr. Lewis worked with -- started foreclosure proceedings.

Wachovia -- now a unit of Wells Fargo & Co. -- has offered to change Mrs. Couts's loan to one with interest-only payments that begin at 66% of her monthly income, rising to more than 100% in a few years.

Citing customer privacy, a Wachovia spokesman declined to say whether the bank took fraud into account when it proposed the modification plan to Mrs. Couts. In a statement, Wachovia said that Wells Fargo has developed mortgage assistance plans to help Wachovia customers with Pick-a-Payment loans (the type Mrs. Couts has) and that the solutions "differ based on the customers' circumstances and what will be required to help them reach a sustainable mortgage payment."

Mr. Lewis couldn't be reached for comment.

During the mortgage boom, brokers commonly cold-called older homeowners. "I was inundated," says Floy Mae Bryant, 84, a retired telephone operator in Visalia, Calif., who had owned her home since the early 1990s. Loan records show Mrs. Bryant refinanced six times in less than three years using multiple brokers.

Serial refinancing was common among older borrowers, legal-aid lawyers say. Brokers pitched loans with low teaser rates, explaining the homeowner could simply refinance when rates reset. Yet borrowers like Mrs. Bryant didn't understand that each refinancing added thousands of dollars in fees to their debt.

Mrs. Bryant's last refinancing was in September 2005, just a month after her previous one. A mortgage broker placed her in a Countrywide Financial Corp. "option ARM," an adjustable-rate mortgage with a monthly payment of $1,545, barely affordable on her $2,310 Social Security and pension income. To make her mortgage payments, she drew on a $39,000 home-equity line of credit that the same broker encouraged her to set up.

One son helped her financially, but he died of cancer in November 2007; five months later, Mrs. Bryant's 65-year-old developmentally disabled son, who lived with her, also died of cancer. Mrs. Bryant missed her March 2008 payment, and Fannie Mae, which had bought the loan from Countrywide, sold her home in foreclosure in April. She moved to a rented trailer 20 miles away, returning two or three times a week to her vacant former home to water the roses.

Legal-aid attorneys challenged the foreclosure on the grounds that the underlying loan was fraudulently made. Fannie Mae is now in the process of setting aside the foreclosure and modifying the loan. "We intend to work with the borrower to reach a resolution that will allow her to remain in the home," says a spokeswoman.

Most defrauded homeowners get no help. Few people know they've been defrauded, and law enforcement generally investigates only when the fraud is perpetrated against lenders, not borrowers. While some legal-aid offices and AARP attorneys have sued lenders, they can take few cases -- and when they do, the cases can drag on until the homeowners die.

A recent case involved John and Vernice Green, an elderly couple in Sacramento, Calif. In late 2006 they signed up for what they thought was a reverse mortgage on their home of 32 years.

But the next month, they found they actually had an adjustable-rate loan more costly than the one they had before. The interest rate went to 11.4% from 6.25%, which increased their monthly payment to $2,106 from $794. Frantic, they tried to reach the broker, Melissa Villegas. According to legal-aid advocates who helped the Greens, she didn't return their calls and the Greens never heard from her again.

The couple soon defaulted. They eventually called Sacramento County Adult Protective Services, which in April 2007 sent a social worker, Heidi Richardson, to their home. Ms. Richardson says Mrs. Green was cognitively impaired, and could read only with a magnifying glass, and that Mr. Green was trying to take care of the home, despite having had both feet amputated. Ms. Richardson found him watering the lawn from his wheelchair.

She referred the case to the California Senior Legal Hotline, a nonprofit law office that has been swamped with foreclosure cases. Ralph Livingstone, 71, a volunteer attorney there, obtained the loan documents, which showed that the Greens had authorized the IRS to release their income-tax returns to the lender, and authorized the lender to obtain their employment and bank records.

Meantime, the application contained various fabrications. It noted that the Greens each had 16 years of education; in fact, Mrs. Green had only been through eighth grade, and Mr. Green had left in fifth grade in Mississippi during the Great Depression to help support his family.

The application also falsely said Mrs. Green was employed as an administrative assistant at Friendship Church in Sacramento. That helped inflate the couple's monthly income to $6,965, versus their actual income of about $3,000, from Social Security and Mr. Green's Teamsters pension.

The documents showed that the transaction costs totaled $20,127, of which $11,757 was for commissions and fees for the broker and lender.

Ms. Villegas's lawyer declined to comment. In an interview, the minister of Friendship Church, Rev. Donald Wright -- who, the Greens told advocates, had originally steered Ms. Villegas to them -- declined to say whether his church employed Mrs. Green. But he said "Melissa was a friend," and described Mrs. Green as financially sophisticated.

"The people who know the truth are me, Melissa and God," said Mr. Wright. "Under no circumstances would I do some illegal crooked stuff."

Mr. Livingstone investigated the loan transaction, hoping that if he could show it was fraudulent, the lender would be more willing to change the terms. To stall the foreclosure, he helped the Greens file a Chapter 13 bankruptcy, and continued to attempt to get the servicer to modify their loan.

"There are thousands of people being washed away in a flood, and we reach into the river and pull out one here and there, and keep them from drowning," says Mr. Livingstone.

Amid the continued stress, Mr. Green was hospitalized. He died Feb. 5, 2008, age 83.

In June, Ms. Villegas, 29, was arrested and charged with participating in a scheme to defraud lenders. The criminal complaint alleges that Ms. Villegas made false statements to investigators and that loan applications she arranged gave false occupations and inflated incomes. Ms. Villegas denied wrongdoing, and the case is pending.

Late last June, the servicer agreed to reduce the principal on the Greens' loan and convert it to a fixed rate with 7% interest. Mr. Livingstone called to tell the 80-year-old Mrs. Green the news. He learned she was in the hospital with kidney failure. She died a few days later, on the Fourth of July.

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