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. The financial company that extended the loan, Reverse Mortgage Solutions, moved to foreclose unless she paid the full balance of the mortgage.
What Ms. Santos did not know at first was that surviving family members were supposed to be offered the choice to settle the reverse mortgage for a percentage of the full amount. In her case, that lesser amount offered to heirs is 95 percent of the home's current value, or about $237,000, according to one estimate. Any shortfall if the home sells for less than the debt is covered by a federal insurance fund, which all reverse mortgage borrowers are required to pay into each month.
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After being contacted by The New York Times, the lender offered Ms. Santos the option to buy the home for 95 percent of the current value. The only problem is that the home is now worth more than it was three years ago when Ms. Santos's mother died.
Lora Bitting, 61, said she was crippled by sadness after her father, Jesse, who took out a reverse mortgage on his Muskogee, Okla., home, died in December. Still, Ms. Bitting contacted the lender a month later to begin the process of paying off the $194,254.34 debt, according to a copy of the letter reviewed by The Times.
But because of delays in uploading her letter and a missing trust document, the lender ultimately sped up foreclosure proceedings on her father's home last month.
There is no data on how many heirs are facing foreclosure because of reverse mortgages. But interviews with elder care advocates, the housing counselors and heirs, suggest that it is a growing problem already affecting an estimated tens of thousands of people. And it is one that threatens to ensnare future generations, as older Americans increasingly turn to their homes for cash. Already, the combined debt of Americans from the ages of 65 to 74 is rising faster than that of any other age group, according to the Federal Reverse. And approximately 13 percent of the reverse mortgages outstanding are underwater, according to an estimate from New View Advisors, a New York consulting firm.