ANOTHER FORECLOSURE CASUALTY - The Elderly!
DESPITE LIVING IN THEIR HOMES FOR DECADES, SENIORS SOMETIMES UNWISELY TAP HOME EQUITY FOR LIVING EXPENSES!
Most of the stories dealing with home mortgage default and foreclosure these days have to do with young families who over-extended themselves to buy their home, and now can't afford the payments. Or, those purchasing recently, and not having any built-up equity when they sell, after only a couple of years in their home. Or, here in Chicago and elsewhere, new home builders and condo developers - who are having trouble selling their newly-constructed inventory despite deep discounts and upgrade incentives.
The plight of many senior citizens focuses on the problem from a different angle.
Many seniors have paid off their mortgages years ago, or have very small mortgage balances left. However, needing expenses to live, they often write loans against home equity for day-to-day living expenses. Unfortunately, many have innocently trusted ill-intent lenders who have taken advantage of their trust, and written for them loans with high fees and interest rates, and often unfordable monthly house payments.
Seniors facing financial hardship have certain options not available to younger borrowers. For one, senior citizens can engender greater sympathy from their new lending institutions, and may find it easier to work out a forbearance program with them, should that become necessary. If proven an unscrupulous lender unfairly took advantage of a senior borrower, based on age, the unfortunate senior may be able to successfully counter-sue the lender to prevent foreclosure action. Judges are often very sympathetic to elderly people who appear to have been taken advantage of.
Those over the age of 62 can consider a Reverse Mortgage against their home - proceeds pay off the existing home loan and provide some monthly income for the borrower. However, this type of mortgage should only be considered as a last resort, in the opinion of Brenda Grauer, of the Illinois Attorney General's Office. "Sometimes the proceeds [of a reverse mortgage] won't be enough to fully pay off their [current] loan. Then, you have to try to negotiate a 'short' pay-off with the lending company."
In Washington, Treasury Secretary Henry Paulson proposed expanding the rate-freeze program adopted by several lenders in January to address the special needs of seniors experiencing difficulty with their mortgages. Lenders would usually rather do a work-out arrangement rather than foreclose. Often times, however, it takes a bit of effort to get the lender to agree, even in the case of their elderly clients.
For more information, review Marilyn Kennedy Melia's article in the February 10th edition of The Chicago Tribune.
