The California Reinvestment Coalition is a consumer watchdog group that has been doing an exceptional job shining a light on unfair reverse mortgage foreclosures. This is a topic that is near and dear to JT Legal Group, as many of our clients are elderly or widowed and facing a situation that has come to be known as a "widow foreclosure."
In order to understand exactly what a widow foreclosure is, first you must understand what exactly a reverse mortgage is, and how it works. Essentially, reverse mortgages are a product for people (typically) over 62 years old that allow them access to their property's equity while still living in the home. In return for the cash these older people receive as an "advance" on their equity line, the bank usually requires that the home title be transferred to them immediately upon the borrower's death.
For some people, reverse mortgages might make sense. If you are older, have a decent amount of equity built up in your home, and you do not care about leaving the property for a family member to inherit, a reverse mortgage might be an option you could consider. However, in our experience, the negatives of reverse mortgages far outweigh the benefits.
The primary and most obvious drawback to reverse mortgages is that (for married couples), usually only one spouse is listed as the "borrower" on reverse mortgage documents. And typically, that spouse is the older of the two partners. From the bank's perspective, the older partner is more likely to pass away first, which means the bank obtains that property more quickly.
Putting aside for a second the ethical implications of that scenario, this also creates an even larger problem. Often times, especially in regards to older couples from earlier generations, only one spouse handles the finances and bills. Frequently, that spouse is the older spouse, and the one that passes away first. This means that every year, thousands of widows find themselves reeling when they receive a foreclosure notice mere days after their partner passes away. This, in a nutshell, is a widow foreclosure.
By far, the king of widow foreclosures is the (now-defunct) reverse mortgage branch of IndyMac, one of the worst offenders of the 2008 housing crisis. That branch was known as Financial Freedom Reverse Mortgage, a brand that only has a 17% market share of reverse mortgages, but accounts for a whopping 40% of all reverse mortgage foreclosures.
How can that be? Well, by all indications, a big factor in that discrepancy appears to be the misleading nature of Financial Freedom's lending practices. There are numerous reports of the non-borrowing spouse being told "not to worry" that they were being left off of the mortgage documents during the reverse mortgage process.
A bank purposely misleading or hiding details from a spouse -- potentially leading to their homelessness or destitution -- just so that they can acquire property more quickly is a shameful tactic, and one that deserves to be exposed. As such, watchdog groups like the California Reinvestment Coalition are ramping up their efforts to make the public aware of widow foreclosures.
Thanks to HUD, many new loans after August 2014 have a provision allowing the surviving spouse to continue to live in the home, as long as a list of conditions are met. However, this protection is not bulletproof, and it's expected that widows and the elderly will be dealing with this problem for some time to come.
If you, or someone you know, is dealing with a widow foreclosure scenario, you should call the experienced attorneys at JT Legal Group as soon as possible for a no-obligation free consultation that will help explain your rights moving forward.
-- Michael Avanesian, Esq.
Note: Attorney advertising. Nothing posted on this blog is intended, nor should be construed, as legal advice. Blog postings and hosted comments are available for general educational purposes only and should not be used to assess a specific legal situation. Nor does any comment on a blog post create an attorney-client relationship. The presence of hyperlinks to other third-party websites does not imply that the firm endorses those websites, their contents, or the activities or views of their owners.