NEW YORK––Nearly 100,000 reverse mortgages taken out by elderly Americans since the Great Recession have failed, “blindsiding elderly borrowers and their families and dragging down property values in their neighborhoods,” according to a new analysis.
A review of government foreclosure data by USA TODAY found a “generation of families fell through the cracks and continue to suffer from reverse mortgage loans written a decade ago,” the publication reported. “In many cases, the worst toll has fallen on those ill-equipped to shoulder it: urban African Americans, many of whom worked for most of their lives, then found themselves struggling in retirement.
USA TODAY noted that five years ago the Department of Housing and Urban Development introduced a series of changes aimed at seniors in reverse mortgages, but the rules were too late for many borrowers.
Many elderly homeowners were either wooed into borrowing money through the special program by attractive sales pitches or were in dire need for cash – or both, USA TODAY said. Missed deadlines, or falling behind on insurance or taxes pushed many into foreclosure.
More Than One-Million Records Reviewed
USA TODAY, which said it worked in partnership with Grand Valley State University and with support from the McGraw Center for Business Journalism, said it found borrowers living near the poverty line in pockets of Chicago, Baltimore, Miami, Detroit, Philadelphia and Jacksonville, according to the review of more than 1.3 million loan records.
USA TODAY said it found that reverse mortgages end in foreclosure six times more often in predominantly black neighborhoods than in neighborhoods that are 80% white.
“Even comparing only poorer areas, black neighborhoods fare worse,” USA TODAY reported. “In ZIP codes where most residents make less than $40,000, the analysis found reverse mortgage foreclosure rates were six times higher in black neighborhoods than in white ones.”