Foreclosure Caseloads Triggered By Reverse Mortgage (Property Tax & Homeowners Insurance) Defaults More Than Double For Two NYC Non-Profits; Problem (Obviously) Centers Around Taking Loan Proceeds In Lump Sum & Spending It Rather Than Pocketing Steady Monthly Disbursements, Paying Bills As They Arise

In Howard Beach, Queens, the New York Post reports:

• When Frederick Feil took out a reverse mortgage on his Howard Beach home, he thought he was ensuring a comfortable future — not putting himself at risk of becoming homeless.
  
  Feil, 67, who has a heart stent and undergoes dialysis treatments, is desperately fighting to prevent Finance of America Reverse from tossing him out of his home.
  
  Feil took out a $353,000 reverse mortgage in December 2011, using all but a few thousand dollars to repay an earlier mortgage and cover hefty origination fees. Feil told The Post he fell behind on property taxes while in the hospital last year — and unexpectedly found himself in foreclosure last March when Finance of America Reverse called the entire balance, which has ballooned to $449,583.85 from interest and other charges, due.
  
  Feil claims Finance of America’s servicer, Reverse Mortgage Solutions, gave him the runaround when he called about the default. The amount is not listed in the foreclosure complaint, which made it tough for him to catch up. Feil turned to lawyer Jennifer Levy of JASA Queens,(1) which provides assistance for the elderly including legal services, she claims the case is riddled with errors.
  
  Levy says Finance of America’s lawyer finally disclosed in May that the arrears totaled $15,375.
  
  “A reverse mortgage is more trouble than help,” said Feil. “If I had known it would be this bad, I would have sold my house.”
  
  ***
  Legal services firms have seen a sharp uptick in these foreclosure cases in the past year, mainly triggered by unpaid property charges. Often the homeowner isn’t told how much is owed or whether arrears are for property taxes or homeowners insurance, lawyers said, adding that the delinquent charges average about $10,000.
  
  JASA’s reverse-mortgage foreclosure caseload has tripled to 30, while Legal Services NYC’s(2) caseload has more than doubled. Because reverse-mortgage foreclosures lack the protections — including mandatory settlement conferences and a 90-day notice requirement — instituted for traditional borrowers after the 2010 robo-signing scandal, these seniors are at risk of losing their homes far more quickly than forward-mortgage borrowers, who get an opportunity for negotiations overseen by the court.
  
  Noting that Congress approved the repayment guarantee for lenders to help seniors, JASA lawyer Donna Dougherty said that for servicers “to not be willing to sit down with an 85-year-old and work out a water or tax bill for $20,000 seems to go directly against congressional intent.”
  
  Some borrowers run into trouble by taking their reverse mortgage payment in a lump sum and spending it, rather than receiving steady disbursements over time to help meet expenses such as taxes.

For the story, see Taking out a reverse mortgage ruined my life.

---------------------

(1) JASA is a non-profit social services agency in New York City that provides needed assistance, including legal services, to older adults with the goal of keeping them living in their homes with independence and dignity.

(2) Legal Services NYC is a non-profit public interest law firm providing civil legal services for low-income residents of New York City.