Of the almost 600,000 reverse mortgages outstanding, 9.8 percent are currently delinquent, up from 8 percent in 2011, The Wall Street Journal reports, citing figures from the Department of Housing and Urban Development (HUD).
HUD’s Federal Housing Administration insures reverse mortgages, which allow homeowners 62 and older to borrow money against the value, or available equity, of their homes and not pay it back unless they move out.
The homeowner can elect to receive a lump sum, a line of credit or monthly payments. Delinquencies have increased as the vast majority of borrowers have opted for lump-sum payouts.
Defaults occur when a borrower fails to pay property charges, including property taxes and homeowners insurance.
But help is available for older borrowers who could even face foreclosure with reverse mortgages.
The Wall Street Journal reports that guidelines HUD released in 2011 require lenders — before initiating foreclosure proceedings on reverse-mortgage holders — to notify borrowers who fall behind on payments that free financial counseling is available.
Such sessions can actually help because it informs borrowers about benefit programs that can help them stay in their homes.
Unfortunately, many older borrowers “don’t know about these programs,” Ramsey Alwin, senior director of economic security at the National Council on Aging, told the Journal.
The council is one of the nonprofits that provide the free counseling.
Here’s one account of a borrower who was able to get back on track through counseling, as published by the Wall Street Journal:
Sally Giddiens, age 71, contacted the National Council on Aging in February after her lender notified her that she was delinquent by $4,921. Ms. Giddiens, a widow and former home health-care worker, took out a reverse mortgage four years ago to cover repairs and a new heater for her three-bedroom home in Philadelphia. But due to medical bills, she fell behind on her property taxes and insurance.
A counselor, Jennifer Pascale, helped Giddiens find cheaper insurance, set up automatic premium payments, and negotiate a repayment plan with her lender, which had paid the arrears on Giddiens’ behalf.
Borrowers can contact the NCOA at 800-510-0301. The council also recommends its BenefitsCheckUp.org, a database of 2,000 government and nonprofit benefits programs.
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