HUD guidelines won’t allow her to pay anything less; foreclosure imminent
Today I spoke to Rose, a senior citizen from Pennsylvania who was facing a foreclosure on her home six years after she took out a reverse mortgage.
With a reverse mortgage, a homeowner at least 62 years old borrows against the equity in his or her home, taking the money either in monthly payments or as a lump sum, with no payment on the money borrowed coming due until the he or she leaves the house.
Rose had taken a lump sum when she got the mortgage, and used the bulk of it to pay for home repairs and some medical debts she’d accumulated. So the money she borrowed through the reverse mortgage was spent, and she was living on her social security income of $1,100 per month. She didn’t have a house payment, but she also had never been able to save enough to pay the yearly tax and insurance bills.
Rose had not paid her taxes or her insurance in five years. The bank that services her reverse mortgage paid those bills, and now they wanted their money back from Rose. The money she owed amounted to about $17,000, and they were demanding no less than $800 per month as repayment. With her $1,100 income, she would only be left $300 to live on, which wouldn’t come close to covering her basic needs.
“Rose, is there anybody you know who could live with you and share the bills?” I asked. “You might be able to afford this if there is.”
“I don’t know anybody who needs a place to live,” she said. “I got this reverse mortgage because I needed money. How can they expect me to pay $800 when I only get $1,100?”
At $800 per month, the debt would be paid back in 21 months, an extremely short period of time to pay back such a large amount.
We called her servicing company and spoke to a representative named Brian. “Why can’t she at least pay this back over a longer time period?” I asked. “Her social security income is only a few hundred dollars more than the payment you’re requiring of her. There’s no way she can afford an $800 payment..”
“It’s not up to us,” said Brian. “The repayment plan is determined by HUD guidelines. If she doesn’t start making those payments, foreclosure will start in three months.”
And that was it. There was no negotiating, no discussion. The Department of Housing and Urban Development had their rules, and those were not flexible.
“I just assumed the money I owed would be added to the loan,” she said. “I was stupid, I didn’t understand how this worked.”
“Rose, I think your best bet at this point is to speak with an attorney to see if bankruptcy might help this situation.”