When opportunity knocks, it may not be a benefit
In 2007, a knock at Barbara Freeman’s front door came with a great opportunity: for her and her husband to be debt-free by signing a reverse mortgage.
At the time, Barbara’s husband was a three-time cancer survivor and they had just gone through bankruptcy. When the salesman pitched the reverse mortgage, they signed.
“They just told us to follow their instructions and that our home would always be secured and remain…we would retain ownership,” she explained.
This year, another knock came – with foreclosure papers.
Reverse mortgages were designed for seniors and allows them to convert equity in their homes to cash. They don’t have to pay back the loan and interest as long as they live in the house.
But now after her husband’s death, Wells Fargo might force her to leave her home.
“I just feel like I’ve lost everything,” Freeman said.
Freeman admits she didn’t really know about reverse mortgages and that an attorney even advised the couple to wait until Barbara turned 62 years old.
At the time she was 57, and only her husband qualified for the reverse mortgage. She signed a Quitclaim Deed, which turned over ownership of the home.
Freeman’s current attorney, Robert Lefkowitz says Freeman didn’t understand the terms and that the Wells Fargo salesman committed fraud as well as unfair trading practices in not ensuring the couple was properly informed.
A spokesperson from Wells Fargo made this statement:
“We are very sorry for Mrs. Freeman’s loss and we can appreciate the difficulty of managing the personal tragedy of losing a loved one and any related financial difficulty. It is always our goal to help customers remain in their homes and avoid foreclosures whenever possible. The foreclosure hearing has been postponed and we have reached out to other resources to explore options that might be available to help Mrs. Freeman remain in the home.
A reverse mortgage has specific origination guidelines: One requirement is mandatory pre-purchase counseling from an independent, HUD approved, non-profit agency to ensure the borrower understands all aspects of the loan. Family members not listed on the loan note are not required, but encouraged to attend.
When the last surviving borrower on a reverse mortgage passes away, the loan is called due in full per the requirements of the note. At that time a Wells Fargo team member is assigned to work with family members on all available options to avoid foreclosure.
Freeman wants her story to be a warning to anyone thinking about getting a reverse mortgage.
New federal rules have gone into effect to better protect homeowners who have reverse mortgages. And Wells Fargo has stopped issuing reverse mortgages.