People with Reverse Mortgages are Defaulting

People with Reverse Mortgages are Defaulting

Many people think that reverse mortgages are safe. While they are safer than most traditional mortgage products, they are not completely safe from default. There is a large number of senior citizens who have taken out a reverse mortgage and are now in danger of defaulting and getting foreclosed on because of unpaid taxes and unpaid insurance premiums that they are required to pay under their deal with the reverse mortgage agreement.

In the United States, the FHA guarantees most of the reverse mortgages that are taken out by senior citizens. These reverse mortgages are a part of the Home Equity Conversion Mortgage program. Currently, the program is doing an audit of the reverse mortgages throughout the country and the results of the audit are going to show a detailed list of reverse mortgage owners who have defaulted on insurance and tax payments.

Overall, there are more than 670,500 reverse mortgages in the United States. Florida alone accounts for more than 10 percent of that number, according to the statistics released by the U.S. Department of Housing and Urban Development (HUD). Of the nationwide number, preliminary reports estimate that about 5 percent of the reverse mortgages (about 30,000) of them are very late or delinquent. About 8 percent of FloridaÆs reverse mortgages are delinquent. One of the reasons FloridaÆs numbers are so high, according to some analysts, is because the insurance costs in the state are so high. Senior citizens have a hard time paying their homeÆs insurance premiums which causes them to fall behind.

The lenders that provide reverse mortgages for senior citizens are allowed to pay insurance premiums and taxes for the homeowner with the money available from the mortgage funds. However, when that money runs out, the lender has to advance the money so the FHA is protected on the loan. And even though many in the lending industry say they have never heard of a homeowner with a reverse mortgage being foreclosed on, it is possible because it is certainly an option that the lender has available to them based on the agreement between the lender and the homeowner.

To help make the situation better, HUD has provided about $3 million to companies that counsel homeowners who find themselves in trouble with their reverse mortgages. In addition to that, those with a reverse mortgage who are at least $5,000 behind on their insurance and tax payments will have up to two years to pay the money they owe before and major legal action is taken. Most of the people in trouble with their reverse mortgage owe less than $5,000 so a rash of foreclosures on these unique homeowners is not something we should expect any time soon.

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