Reverse mortgages are a polarizing subject. Ask around, and people will either tell you they’re a great idea, or a terrible one, with very little in-between. In truth, there is validity to both sides of the argument, and it each homeowner’s situation is unique. That means that there is no one-size-fits-all advice when it comes to whether or not a reverse mortgage is right for you.
What does work for everyone though, is careful consideration. The reason we advocate for this is because, all over the Michigan and in fact all over the USA, reverse mortgage foreclosures are on the rise. This means that every year, more and more people lose their homes after taking out a reverse mortgage, which puts them in a position where bankruptcy can seem like the only way out.
The people who seem to be hit the hardest by this growing phenomenon is seniors. Older people are taking out reverse mortgages to cover rising medical expenses and home improvement projects they couldn’t otherwise afford, and then losing everything in the gamble. But why? How does this happen? And is bankruptcy the only option in that situation?
According to federal data, increasing numbers of seniors lose their homes to foreclosure because they either fell behind on their property charges (like taxes and insurance), or because they didn’t meet the requirements of their complex reverse mortgage loans.
In many cases it was simply a case of not fully understanding what they were getting into. Being told that you never have to make another house payment again sounds wonderful, especially when money is tight and the budget barely stretches to meet monthly needs. But it’s never as simple as that. These types of loans are very complex and often come with long lists of requirements that must be met.
If you don’t meet the many requirements, the lender can foreclose on you!
Fall behind on your tax or insurance payments, and the lender can foreclose. Fail to maintain the home, and the lender can foreclose. In fact, there are any number of small-print details that seniors often miss and the price that many of them pay is foreclosure.
In addition, there is the issue of one spouse getting a reverse mortgage but leaving the other spouse’s name off the mortgage document. Of course most lenders will not grant a reverse mortgage loan without getting the signature of every person named on the deed to the property.
According to the American Association of Retired Persons, homeowners who are 55 years of age and older account for approximately 25 percent of home foreclosures each year, and the rate is rising. Also worth noting is the fact that Michigan is in the top four states with the highest number of home foreclosure amongst seniors.
This can put many older Americans in difficult situations. For example, loan modification programs often don’t assist senior citizens because most seniors do not have earned incomes. Additionally, many seniors fall prey to financial predators who will claim to be able to help them with their foreclosure, but do little more than take their money and disappear. As a result, many seniors are filing for bankruptcy, but is it the right choice?
The truth is that, just like with a reverse mortgage, there is no one-size-fits-all solution for financial troubles. Bankruptcy works really well for some people, and wouldn’t be a good solution for others. Each person’s situation if different, and needs to be carefully assessed by someone who can help them make the right choice.
If you or a loved one are struggling financially and are considering bankruptcy, or are facing foreclosure and want to know if bankruptcy s right for you, talk to our one of our skilled bankruptcy attorneys. At The Kronzek Firm, we understand that life is full of circumstances that are hard to plan for, but we can help you get back on your feet and rebuild your future. Call 866 766 5245 to discuss your unique situation with an experienced bankruptcy attorney today. You’ll be glad you did.