Selleck never explains the fine print.
thatís a problem, some critics say.
a commercial hawking reverse mortgages, the TV actor
doesnít tell people how they could get into trouble
with the product, a special kind of loan that allows
borrowers aged 62 and older to convert a portion of
their homeís equity into cash.
some say reverse mortgages are useful because they allow
the elderly to age in place, many others have recounted
harrowing experiences ó including foreclosures ó in
Philadelphia, which until recently was the city with the
highest rate of reverse mortgage originations in
America. (Origination refers to the application and
processing of a reverse mortgage.)
believe that reverse mortgage lenders have targeted
minority homeowners in low-income neighborhoods with the
zeal of predators.
Cammile, 73, of North Philadelphia, is a homeowner with
a tough reverse-mortgage story to tell.
years ago, she took out one on her three-story brick
twin house. Under the terms of a reverse mortgage, the
borrower doesnít have to repay the loan as long as she
lives in the home.
she is responsible for property taxes, insurance and
upkeep of the house.
Cammile took out a reverse mortgage on her home in North
Philadelphia but nearly lost it because she
misunderstood some of the terms of the document.
an unmarried woman with a son and four grandchildren,
didnít appear to understand that paying the insurance
was her obligation. In fact, said her lawyer, Beth Shay
of the SeniorLAW Center in Philadelphia, Cammile was
told by mortgage processors that she should let the
mortgage company pay for it.
did. Then the company sued her for the $4,500 it laid
out for insurance, threatening to take her house, Shay
was upsetting," Cammile said. "It wasnít
clear what they said to me, how they said it. I didnít
have the income to handle it."
the SeniorLAW Centerís intervention, Cammile was able
to repay the mortgage company for the insurance. But it
wasnít without pain. Cammile had to tap a large
portion of her Social Security income, as a result
suffering through a month with little food.
objectionable, what can happen to people," Shay
reverse mortgage "has the possibility of being
abusive," said Ira Goldstein, president, policy
solutions, of the Reinvestment Fund Inc. in
Philadelphia, which invests in low-income neighborhoods.
who receive reverse mortgages often have paid off their
homes and use the loan to address health-care costs or
to fix their houses, allowing them to live in their
homes till death.
a reverse mortgage, the homeowner receives a monthly
stipend, or a lump-sum payment from the finance company,
which also assesses fees and interest.
the borrower dies or moves, the bank gets the house.
can be a safe option for people to stay in their
homes," said Amy Castro Baker, a housing expert at
the University of Pennsylvaniaís School of Social
Policy and Practice. "But itís also layered with
risk, often used as a predatory product."
lenders that specialize in reverse mortgages could not
be reached for comment. A division manager for Finance
of America Mortgage L.L.C. in Philadelphia said that he
was willing to answer questions but that it would take
more time before he could get approval for his
National Reverse Mortgage Lenders Association has said
that the product can be useful to people with a large
amount of equity in their homes.
years, reverse mortgages brought pain to many spouses of
borrowers, advocates say. Many times, a husband who was
62 or older would take out a reverse mortgage but would
be unable to include the name of his wife because she
was under 62.
the husband died, the house would be foreclosed on, and
the wife would have to move.
her research on reverse mortgages, Baker discovered
numerous instances in which people were assured by their
brokers that both the husband and wife were listed on
the mortgage, "but thatís not whatís in the
fine print," Baker said. If the surviving spouse
wanted to keep the house, she would have to pay the loan
balance in full or 95 percent of the appraised value of
often the surviving spouse would be facing a funeral and
the loss of her home at the same time," Baker said.
in federal laws in 2015 now protect surviving spouses,
allowing them to stay in the house. But advocates say
some problems persist.
often, children expect to inherit their parentsí
houses upon their deaths. Instead, heirs find to their
surprise that they have to either pay back the reverse
mortgage loan, or pay nearly all of the houseís value,
explained Michael Froehlich, a lawyer with Community
Legal Services in Philadelphia and an expert on reverse
are forced to walk away from the house.
inheriting houses, families canít build
intergenerational wealth, which allows poverty to
perpetuate, Froehlich added.
is not uncommon that homeowners with reverse mortgages
have been foreclosed on because they forget to pay their
property taxes and insurance, Froehlich added. This isnít
as careless as it seems, he said, especially for elderly
people who donít remember that when they were paying
down their original mortgage, taxes and insurance were
typically paid from an escrow account, Froehlich said.
2010 and 2016, Philadelphia ranked first in the nation
for reverse mortgage originations, with 50 per 1,000
homeowners, according to a 2017 analysis by the Federal
Reserve Bank of Philadelphia and Fannie Mae. The
national average was 20 originations per 1,000.
one-third of borrowers in Philadelphia with such loans
between 2010 and 2014 defaulted on them, more than
double the national rate, the bank report said.
that same time period, African-American homeowners in
Philadelphia received about 66 percent of reverse
mortgage originations, according to a report in June by
the Reinvestment Fund.
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Point Breeze/Grays Ferry area had the largest number of
loans of any neighborhood in the city, according to the
bank report. In that neighborhood, the median household
income for residents 65 and older was $20,255, which is
below the federal poverty level for a family of three.
Nearly 80 percent of older residents living in the
neighborhood were described as nonwhite or Hispanic.
reverse mortgage originations grew from fewer than 100
per year between 1991 and 2004 to a peak of 1,727 in
2011. The number fell to 199 loans in 2017, the report
decline coincides with federal efforts to protect people
who get reverse mortgages, in part by making it harder
for people with poor credit and low income to receive
them, experts say.
history of reverse mortgages is one of predatory
practices, Philadelphia Councilwoman Cherelle L. Parker
clearly shows that reverse mortgage lenders are
targeting minority and low-income neighborhoods,"
she wrote in an email. Parker praised city and judicial
officials for looking out for reverse-mortgage victims.
say Philadelphia has been particularly ripe for reverse
mortgages because it has a large population of
"house-rich, cash-poor," aging homeowners in
low-income neighborhoods where houses were traditionally
who has interviewed numerous older African-American
homeowners since 2010, said, "You hear the same
stories over and over of people being steered into risky
reverse mortgage schemes."
said reverse mortgages borrowers are often naive and
inordinately "responsive to ads from Tom Selleck
and (fellow actor) Henry Winkler. In many instances,
peopleís comprehension of the product is simplistic
and based on those commercials."
ads should be "banned," said the daughter of a
woman who took out a reverse mortgage. The unidentified
daughter is quoted in the Reinvestment Fund report.
needs to make a (new) commercial," she said: "
ĎTheyíre taking your homes.í "