More than 30,000 U.S. home owners are facing foreclosure after defaulting on their reverse mortgages.
Reverse mortgages are a type of home-equity loan only available to home owners 62 years old or older. These home owners tapped into the equity of their paid-off homes to help boost their income, but now they could lose their homes after failing to pay property taxes, property insurance premiums, or other costs associated with the home.
Florida, in particular, is hard hit with nearly 5,300 in default from reverse mortgages; that's the highest number in the country, making up about 18 percent of the U.S. total, according to the CredAbility Group, a nonprofit consumer credit counseling service.
However, some experts say critics shouldn't be too quick to just blame the problem on reverse mortgages in general.
Peter Bell, president of the Reverse Mortgage Lenders Association, says that many of the home owners now in default likely would have been facing foreclosure earlier if they hadn't had reverse mortgage companies lend them the money needed to pay insurance and tax bills.
The reverse mortgage has actually provided more protection for them than under usual circumstances, he says. Whenever a home owner can't pay their taxes, they run the risk of losing their property through foreclosure. In this case, mortgage servicers have provided advances on their behalf to avoid that.
Source: Seniors Find Dark Side to Reverse Mortgages, Orlando Sentinel (Feb. 3, 2011)