patrick.net

More importantly, are some of these reverse mortgage companies publicly traded, and what are their ticker symbols?

Ms. Santos’s mother, Yolanda, began borrowing money against the equity in her home in 2009, when she was in her 80s. Ms. Santos thought the arrangement would defray her mother’s living and medical expenses by providing cash up front.

It was only after her mother died two years later with an outstanding reverse mortgage balance of about $308,000, that Ms. Santos learned the loan had in fact jeopardized her parents’ nest egg.

Lets do some rudimentary math here:
2 years x 12 months per year or around 24 months.
308000.00 / 24 = $12,833 per month.

I'm sure that there are interest and fees involved, meaning that the actual amount that they got every month for 2 years was certainly less than $12,833, but that's still a pretty substantial number for someone who is not living in a nursing home. It would be nice if we had more details here on exactly what the terms of the reverse mortgage were and if any lump sums were taken. Even if the actual number of months for the two years was more like 30 months, that's still around $10K per month.

Am I missing something?

zzyzzx says

Am I missing something?

Well, it's possible there was an existing mortgage on the property and the reverse mortgage added to it. The article seems to imply by using the word "nest egg" that it was paid off, but who the hell knows? These types of articles aren't always researched well, partially because the journalists don't understand the concepts and partially because the "victims" aren't always forthcoming.

The arrearages as of October 2012 when the defendants' motion for judgment on pleadings and to dissolve the preliminary injunction was denied were $320K, and the original balance was apparently $360K:

http://www.scribd.com/doc/147152262/Santos-v-Rms-3-12-Cv-03296-Sc-Order-Doc-25

Apparently they're scheduled to go to trial in 2.5 weeks:

http://www.cand.uscourts.gov/CEO/cfd.aspx?7111

corntrollio says

Well, it's possible there was an existing mortgage on the property and the reverse mortgage added to it.

what happens in a RM is that you roll the unpaid regular loan into the starting RM principal balance and start accruing interest on that.

Typical RM rates hit 9% during the peak:

http://research.stlouisfed.org/fred2/graph/?g=uPT

and if any lump sums were taken

lump sum is the typical disbursement -- 60% of the equity is common, gone.

then you starting accruing that 9% pa compounding interest (now ~4%).

hmm IIRC the lump-sum disbursements came with fixed options, but if the loan was taken out during the bubble and not refi'd down that would be really bad for the heirs, now

Many heirs find themselves in a difficult position when they wish to maintain ownership of their parent's property that has a reverse mortgage. These loans are not assumable and the reverse mortgage must be paid off somehow. They are often forced to sell the property.

Refinancing with a bank loan is not available as conventional lenders will not provide a loan to someone who is not on title. Some hard money lenders will refinance reverse mortgages by making a loan against the property and then allowing the heirs to assume and personally guarantee the loan. Once the loan transaction is complete the title of the property will be in the name of the heirs which will allow them to refinance with a lower cost conventional bank loan. This process will also allow the heirs to preserve the property's tax base which can save thousands of dollars each year on taxes.

jahstah says

Many heirs find themselves in a difficult position when they wish to maintain ownership of their parent's property

Well that's just what happens. There's no guarantee that anyone is going to inherit a parent's estate in the first place. While the parent is alive, they do what they have to to survivie financially and if that means they leave an encumbered home, so be it. If they had gone into a nursing home and had expenses that ate up their estate, the end result would be the same. A friend began writing check's on his father-in-law's $750,000 estate so he could stay in his home when he lost his mental faculties in his early 80's because the four siblings couldn't agree on anything and he was a CPA. He wrote checks for $10,000 a month that ultimately decimated the estate while the old man lived into his mid-90's and actually out-lived my friend who had to turn the affairs over to one of his brothers-in-law during his final illness and subsequent death. Then Rita came through and he had to move to his daughter's home 100 miles away where he spent his final two years and died at 97. The same would have happened if he'd had a reverse mortgage.

Does this mean that Fonzie was wrong?

zzyzzx says

Does this mean that Fonzie was wrong?

I think it really means that kids who are blood sucking leaches and think they will inherit the home are SOL.

fonzie...

Yeah I always thought Fonzie was going to go on to do some shit. But it turned out there just wasn't any place in the post Doo wop era for a middle aged greaser.

tovarichpeter says

The Reverse Mortgage scam

It'a a government plan to help retirees stay in their home. The government is not in the business to scam retirees.