Reverse Mortgages Could Save Foreclosures

Lewis said 80 to 85 percent of people pay off another debt when they get a reverse mortgage.
Reverse Mortgages Could Save Foreclosures
Property agents talk with customers at their stall which is advertising home foreclosures for sale, during a property fair in Los Angeles (Mark Ralston/AFP/Getty Images)
8/6/2009
Updated:
10/1/2015
<a><img src="https://www.theepochtimes.com/assets/uploads/2015/09/ReverseMortgages86028274.jpg" alt="Property agents talk with customers at their stall which is advertising home foreclosures for sale, during a property fair in Los Angeles (Mark Ralston/AFP/Getty Images)" title="Property agents talk with customers at their stall which is advertising home foreclosures for sale, during a property fair in Los Angeles (Mark Ralston/AFP/Getty Images)" width="320" class="size-medium wp-image-1826918"/></a>
Property agents talk with customers at their stall which is advertising home foreclosures for sale, during a property fair in Los Angeles (Mark Ralston/AFP/Getty Images)

NEW YORK— Jeff Lewis, Chairman of Generation Mortgage, knows of many, many people who would otherwise have been foreclosed upon had they not received a reverse mortgage.

“It happens every week, where we close a loan and get there just before the foreclosure would have taken place,” he said.

The reverse mortgage method “reverses” the flow of money of a traditional mortgage—the homeowners receive payments from the bank in exchange for an increasingly larger mortgage. It’s not for everyone, said Lewis, but it can be the perfect solution for homeowners age 62 or over, particularly if they have a lot of equity in their home and are not planning on moving for at least several years.

More and more seniors are taking out reverse mortgages, said Lewis, “because they’re finding it harder to survive. And not only the current economic environment that we’re in, but just based on cost of living these days—it’s pretty high for seniors, and they may not put away enough money for retirement and/or they’re living a little longer than expected.”

Lewis said 80 to 85 percent of people pay off another debt when they get a reverse mortgage.

The reverse mortgage system is not widely understood by seniors and one major misconception is that the bank will own the home, said Steven B. Horn Sr., president of Residential Reverse. “They think they can take all equity in their home, and that’s not the case either—they are only allowed to take a percentage of the home,” he said, adding that no more than 50 percent is the allowable limit. “The older you are, the more access to the equity you have,” he said.

“In most cases there is equity left over when they pass away to give to their heirs,” said Mr. Horn Sr. “A lot of seniors are scared they are not leaving any equity for their children or grandchildren, when in most cases they are.”

His said 20 to 30 people per day call his company to inquire about reverse mortgages.