Posted by Chris Oberholtz, Multimedia Producer - email
LEAVENWORTH, KS (KCTV) -
Reverse mortgages have become a popular way for seniors to stay in their homes and create an income. However, to avoid possible financial ruin and heartache, experts and one Kansas widow say the practice must come with a warning.
The single biggest investment most Americans will ever make is a house.
In recent years, the financial option of reverse mortgages has allowed homeowners to collect cash or create a line of credit from the equity in their property.
Twenty years ago, Rebecca and Walter Simpson bought a modest home on Klemp Street in Leavenworth, KS, where they could retire and quietly live out their lives.
"It was a lovely place and we enjoyed it very much," Rebecca Simpson said.
The enjoyment faded in the spring of 2007, when the couple's adjustable rate mortgage kicked in and pushed their monthly loan payment to an unmanageable amount.
When Walter Simpson broke that news to his wife, she says he also promised to figure out a way to keep them afloat financially.
"He said we can't make the payments if we don't take the reverse mortgage," she said.
According to her, he had already talked with a broker who was willing to write up the reverse mortgage. But there was a catch.
She said the broker refused to do the deal unless her name was removed from the deed.
"They said that's the only way we'll do it," she said.
She said she balked at the idea of her husband's name alone appearing on their property records. She acquiesced after the broker offered a reassuring promise.
"If something happened, they would bring the reverse mortgage back to me and I'd have to renew it," she said.
With her husband insisting a reverse mortgage was the only way for them to make their next payment, she put pen to paper.
"I signed away my rights," she said. "And it just became Walter's home only."
It was a signature she deeply regrets. Less than three years later, on Valentine's Day 2010, her husband slumped over in his favorite chair while watching television.
"I gave him mouth to mouth and I just couldn't get him to… he opened his eyes and just closed them back," she recalled. "He loved me with all that was in him, and I loved him."
Very quickly, the consequences of a reverse mortgage without her name became a reality.
According to her daughter, Cynthia Brown, "The ground hadn't even settled on him (Walter Simpson). They sent her that foreclosure letter, 30 days (later)."
That foreclosure notice, sent by Bank of America, nearly caused a second death in the family. After reading it, Rebecca Simpson suffered a heart attack.
"Three days later they were inserting a pacemaker, they had to do it that quick," Brown said.
Unaware of the reverse mortgage, Brown wrote a letter, from her mother's hospital room in Kansas City, MO, asking the court to halt the foreclosure.
Her only answer came during a visit to check on the Leavenworth home.
Instead of the clean, beautiful house she was expecting to see, Brown said she confronted by filth, cracked toilets, missing heirlooms and bright orange stickers that read "Winterize, do not use."
The stickers served as evidence that BOA had already sent a third-party company into the now bank-owned house.
Brown claims those contractors botched the job, causing unbelievable damage to the home.
"So when it came winter, the pipes froze and burst; Destroyed the downstairs," Brown said.
Even if Rebecca Simpson felt well enough to apply for a new reverse mortgage, Brown no longer believes her mom could qualify.
The equity the house once held no longer exists and therefore a new reverse mortgage likely wouldn't cover the cost of repairs.
"We don't have the money to fix it. It's a shell of what it used to be. It's condemnable, I think," Brown said.
Rebecca is harder to convince.
"I just want to go back home," she said. "That's all I want to do. I'll be fine if I can ever get back home."
A homecoming appears unlikely at this point. After being sold five times, Rebecca Simpson's reverse mortgage is once again in foreclosure.
Without her name on the deed, her only real option is to hire a lawyer and sue BOA for the loss of and damages to her personal property left in the home when the bank foreclosed.
What the Simpson's went through is not supposed to happen.
Under federal law, the Simpsons should have received counseling before signing anything. Rebecca Simpson doesn't remember any counseling.
According to law professor and reverse mortgage expert Victoria Duke, a good counselor should have warned Rebecca Simpson about what coming off the deed would mean in the event of her husband's death.
"Women outlive men," Duke said. "If I had a client in front of me, where the wife is younger than the man, I would absolutely say no. Don't sign away your interest."
Duke adds that the broker handling the Simpsons reverse mortgage may have been aware of the likelihood of Walter Simpson dying first and the home returning to the bank.
Duke said the broker may actually have earned a bigger commission by inking a deal with only Walter Simpson's name on it.
"That broker may have intent to get that senior to sign up for a reverse mortgage that may not be good for them," Duke said
Not good is a perfect way to describe the outcome of Rebecca's reverse mortgage.
Copyright 2012 KCTV (Meredith Corp.) All rights reserved.
Victoria Duke, a law professor at Indiana Tech and expert in reverse mortgages, offers tips for preventing what happened to the Simpsons: The reverse mortgage financial option, available to Americans 62More>>
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