One Nightmare of a Reverse Mortgage

Sarah Havemeyer of Southampton, N.Y., has been fightingOneWest, a California bank, in court for two years over her late mother’sreverse mortgage.

A reverse mortgage typically places a lien against a senior’shome in exchange for lump sum or periodic payments with the full amountborrowed not coming due until the borrower dies, moves, or sells.  The terms of this reverse mortgage, whichdates back to 1997, make this home loan stand out from others.  At age 78 and a widow, Havemeyer’s mothersigned up for a reverse mortgage “with a base interest rate of 9.95 percent,plus a 50 percent share for the lender of increases in the value of the housefollowing closing, plus another 2 percent “maturity fee” to sweeten the payouteven more.”  The reverse mortgage alsocalled for a $33,000 mandatory purchase of an annuity by the homeowner “that isadded to the principal balance and incurs compounding interest while lesseningthe lender’s future payments to the homeowner.”

Financial Freedom Acquisition LLC, a subsidiary of OneWest,is now filing for foreclosure. Havemeyer, the executrix of her mother’s estate, is challenging theforeclosure and estimates the estate could owe up to $1.5 million on a reversemortgage which Havemeyer’s mother only received $272,911 from.

This reverse mortgage may be an outlier, but elderlyborrowers and their family members need to be aware that reverse mortgages can behazardous to financial health.

See Kenneth R.Harney, One Woman’s Reverse MortgageNightmare, Miami Herald, July 20, 2013.