Do You Speak My Language?

By Shannon Hicks

like an odd question for most english-speaking reverse mortgage professionals but reverse mortgages have a broad cross-cultural and international reach. While HECM counseling is the gate prospective borrowers must pass through to qualify for a reverse mortgage, language barriers can close that opportunity for many.

DebtHelper is helping break down these barriers, offering reverse mortgage counseling in Spanish, Portuguese, French and Creole. Beginning with Spanish in 2006, DebtHelper added more languages in 2008. These services are absolutely essential to insure non english-speaking borrowers are making are informed financial decision. In the last decade banks have made a concerted effort to reach underserved borrowers with ads in their language. Yet these efforts often fell short when no translation services were provided for disclosures and counseling. For the Home Equity Conversion Mortgage Program (HECM) to effectively grow we must effectively serve our foreign language speaking prospective borrowers in all aspects.

Confusion in Every Language?
Exploring financial objectives, loan particulars and personal finances requires an in-depth and detailed conversation. Language barriers aside, financial products like reverse mortgages have their own vocabulary where confusion can abound. I experienced this first hand six years ago when I spoke with the Spanish-speaking daughter of a potential borrower on the phone and agreed upon a time for a meeting in her parent’s home. I arrived just after dinner that evening and began my presentation with the daughter translating. Four hours and two cups of coffee later, I was enlightened to the need to match prospective borrowers with loan officers and counselors fluent in their language “We are talking about a huge life changing financial decision here, without the counseling in their own language, the probability of having these homeowners having the perfect understanding of this program is significantly reduced. There are many technical terms that make more sense in one’s own language,” said Claudia Fehribach, Total Quality & HECM Manager at DebtHelper.

Contract law in the United States generally provides that a person who signs a contract without knowing its contents will be bound by the terms and ignorance will not relieve them of their obligation except in cases of fraud or misrepresentation. Federal disclosures, like the Truth in Lending Act (TILA) or the Good Faith Estimate (GFE), are undermined and can be rendered useless with language barriers. Transparency in the lending process requires understanding. That transparency must be matched with advertising, counseling and disclosures in the borrower’s native language.

An Unreached & Untapped Market
After years of declining loan volume due to the housing collapse, reverse mortgage lenders and loan officers are looking for creative ways to gain marketshare. Making inroads with Realtors for HECM purchase transactions and building relationships with financial planners is just the beginning. But are we overlooking an even larger market while focusing on unique applications of the HECM? By the year 2020, the Asian American population is projected to grow by 94% and the Hispanic by 111%. Our industry has a tremendous opportunity to both reach underserved markets while increasing our overall marketshare. When asked about the non-english speaking market Fehribach said, “It’s an almost untouched market. We direct our effort to the Spanish community (which is huge), but we overlook the potential of other communities that could be taking the benefits of a HECM in their senior years.”

To address this growing need DebtHelper has plans to expand counseling services for Vietnamese, Russian and Chinese. According to the agency most Portuguese counseling requests originate from Florida and New York / New Jersey and Massachusetts. In fact a new counseling center was opened in Boston to better serve the Portuguese speaking population.

Coupled with counseling is the need for more foreign speaking reverse mortgage loan officers. These uniquely skilled individuals are well suited in reaching foreign-speaking communities who may have never heard of the reverse mortgage program. Equipped with a cultural understanding and fluency in the language these professionals would begin to serve a motivated and accepting audience.

Reverse mortgages are truly a world product. India, China, Australia and Germany all have similar programs to name a few. More importantly we have several untapped foreign speaking markets within our own borders. Bilingual reverse mortgage professionals have a tremendous opportunity to reach specific markets with little competition. The demographic trends show massive increases in non-english speaking populations, many who are homeowners. Perhaps we will see the emergence of national lenders specializing in specific non-English speaking markets bridging the gap for future borrowers. After all, success requires both identifying and meeting consumer need. Counseling agencies have begun making inroads, now it’s our turn.


A Risky Lifeline for the Elderly Is Costing Some Their Homes

As a requirement of reverse mortgage loans, a counseling session must be provided by a HUD approved housing counseling agency. The reverse mortgage counseling session prevents this type of problem from happening. is a HUD approved housing counseling agency that will inform you of everything you need to know before considering a reverse mortgage loan.

Call us now to make an appointment 1-800-920-2262 or

The very loans that are supposed to help seniors stay in their homes are in many cases pushing them out.

Reverse mortgages, which allow homeowners 62 and older to borrow money against the value of their homes and not pay it back until they move out or die, have long been fraught with problems. But federal and state regulators are documenting new instances of abuse as smaller mortgage brokers, including former subprime lenders, flood the market after the recent exit of big banks and as defaults on the loans hit record rates.


Some lenders are aggressively pitching loans to seniors who cannot afford the fees associated with them, not to mention the property taxes and maintenance. Others are wooing seniors with promises that the loans are free money that can be used to finance long-coveted cruises, without clearly explaining the risks. Some widows are facing eviction after they say they were pressured to keep their name off the deed without being told that they could be left facing foreclosure after their husbands died.

Now, as the vast baby boomer generation heads for retirement and more seniors grapple with dwindling savings, the newly minted Consumer Financial Protection Bureau is working on new rules that could mean better disclosure for consumers and stricter supervision of lenders. More than 775,000 of such loans are outstanding, according to the federal government.

Concerns about the multibillion-dollar reverse mortgage market echo those raised in the lead-up to the financial crisis when consumers were marketed loans — often carrying hidden risks — that they could not afford.

“There are many of the same red flags, including explosive growth and the fact that these loans are often peddled aggressively without regard to suitability,” said Lori Swanson, the Minnesota attorney general, who is working on reforming the reverse mortgage market.

Joan Serioux-Forde, 72, thought that she couldn’t feel more devastated after her husband, Christopher, died last year. Then, roughly a month after the funeral, she received a letter from Generation Mortgage, a reverse mortgage lender, informing her that unless she paid $293,000, she would lose her home in San Bernardino, Calif. Ms. Forde said she was never informed that if she wasn’t on the reverse mortgage deed, she would have virtually no right to stay in her home unless she bought it outright. “It’s a nightmare,” she said. Generation Mortgage declined to comment.

Although the numbers of reverse mortgages have declined in recent years, the rate of default is at a record high — roughly 9.4 percent of loans, according to the consumer protection bureau, up from around 2 percent a decade earlier. And borrowers are putting their nest eggs at risk by increasingly taking out the loans at younger ages and in lump sums, federal data and a recent bureau report show.

Peter H. Bell, president and chief executive of the National Reverse Mortgage Lenders Association, a trade group, said that he met with officials from the Department of Housing and Urban Development to begin hashing out a way for lenders to adopt a uniform standard to determine whether seniors can afford to take on the loans.

Used correctly, reverse mortgages can be a valuable tool for seniors to stay in their homes and gain access to money needed for retirement. Seniors who have built up equity in their homes can borrow against a percentage of that and take out a lump sum or a line of credit. The loan doesn’t have to be repaid until the homeowner moves out or dies, but borrowers still have to pay property taxes, maintenance and insurance.

Reverse mortgage lenders and brokers note that the loans are highly regulated and require potential borrowers to speak to a certified housing counselor about the potential pitfalls before taking out the loans. Mr. Bell adds that his trade group strictly monitors the advertising of its roughly 400 members to ensure that it is accurate.

Since the financial crisis, the reverse mortgage market has been in flux, dampened by a drop in property values, complaints about the loans and the recent departure of big lenders. Originations backed by the federal government peaked at about 115,000 in 2007 and totaled about 51,000 loans last year.

MetLife was the latest major player to exit the market, in April. That followed the departure last year of the two biggest reverse mortgage lenders, Bank of America and Wells Fargo, which cited falling housing prices and difficulty assessing borrowers’ ability to repay the loans.

Into the void left by the big banks have moved smaller mortgage brokers and lenders. Some of them steer seniors into expensive, risky loans with deceptive sales pitches and high-pressure tactics, according to regulators, housing counselors and elder-care advocates.

Mark S. Diamond, a former subprime mortgage broker in Chicago, who has been sued for fraud by the Federal Trade Commission and the Illinois attorney general, faces a federal lawsuit filed in June by seniors who claim that he sold them reverse mortgages and either pocketed their loan amounts or promised to put the proceeds toward home repairs that never materialized. A lawyer for Mr. Diamond did not return calls for comment. Some solicitations reviewed by the Consumer Financial Protection Bureau present reverse mortgages as “free money” or mistakenly tell seniors that they could never lose their home. One Maryland reverse mortgage lender tells seniors that they can put the proceeds toward a vacation: “Just because you’re retired doesn’t mean you don’t need a vacation every now and then.” Last year, the Massachusetts Commissioner of Banks issued cease-and-desist orders to a handful of reverse mortgage firms for operating without a license. In its advertising, one of those mortgage brokers falsely promised seniors “you won’t lose your home.”

Officials at the bureau, which issued a report on the industry in June, said they heard from a number of seniors who claimed that lenders encouraged them to make their older spouses the sole borrower on the loan. The brokers earn more money when they make larger loans with the older spouse as the only borrower.

Some surviving spouses complained that brokers told them they could be added later, but they were not. The bureau says those seniors are at greater risk of losing their homes. The complaints, according to elder-care advocates and federal officials, have been rising during the past year, although there are no exact numbers.

Linda McMahon, a 65-year-old widow, watched helplessly as the locks were changed on her home in St. Croix Falls, Wis., last month. She said that in 2005, when her husband was 82 and she was 58, a mortgage broker from Wells Fargo promised her that she could add her name to the mortgage once she turned 62. That never happened because that year, in 2009, she didn’t have time to deal with it as her husband’s health quickly deteriorated and he died from a heart condition, she said. Soon, she was unable to pay any of the property taxes and insurance. “I am devastated,” said Ms. McMahon, who is retired, living on Social Security income and now renting an apartment.

A spokeswoman for the bank declined to comment. Reverse mortgages also have troublesome incentive structures that might encourage brokers to steer seniors toward lump-sum loans, which carry a fixed interest rate, rather than a line of credit with a variable interest rate, the bureau found. In a lump sum arrangement, the interest charges are added each month, and over time the total debt owed can far surpass the original loan.

Brokers earn higher fees on these loans and even more money when they sell the loans into the secondary market, where they can get rates nearly double those for variable loans, according to rate sheets obtained by the consumer bureau.

Some 70 percent of reverse mortgages are taken in lump sums, up from 3 percent in 2008, according to the bureau. When seniors use the money to pay off other debts, especially right before retirement or early into it, that can leave them with scarce resources to pay their property taxes and insurance.

Ms. Forde, who lives in fear of losing her San Bernardino home, said she could not afford to save her house by paying the full $293,000 debt. Now, she said, she spends much of her day standing guard by the window. Her home is already in foreclosure proceedings. With a wavering voice, she said: “I have nowhere to go.”


Will Bankruptcy Rescue Reverse Mortgage?

Dear Bankruptcy Adviser, My father recently passed away. He had a reverse mortgage on his home. I inherited the house when he passed away. The reverse mortgage company wants their money now that my father is gone. There is no way I can pay it. My father used almost all of the equity, and the lender wants the balance, but the house still has some equity. We have lived here for 45 years. Can I file bankruptcy if the house is in my name? — Elizabeth

Dear Elizabeth, I am sorry for your loss. I hope the loss of your father will not be compounded by the loss of your home of the past 45 years. Unfortunately, you are facing an uphill battle.

Many seniors take out reverse mortgage loans. And from what I understand about reverse mortgages, they are great for the current owner of the property — just not so great for the owner’s heirs. The purpose is to allow the owner to stay in his or her home without having to pay the mortgage (principal or interest), and the owner can take money out of the home to spend.

The loan is paid back only when the owner dies or sells the home. The lender takes the risk that the property value decreases or that the owner lives longer than anticipated.

In your case, your father passed away, and you want to keep the home. Your ability to keep the home is definitely in jeopardy because of the reverse mortgage. Once the bank learns that the homeowner has died, the heirs or those who inherit the home must act quickly. Unless your father’s spouse is still alive, was a co-borrower on the reverse mortgage loan and is living in the home, you have six to 12 months to complete one of the following three options.

Refinance the property. Try refinancing with the current lender or a new lender into a conventional loan. This will allow you to start repaying the current principal and interest.

Pay off the current loan. Obviously, this option will be very difficult or impossible for you, but it is still an option. If you are looking to try this, you could consider borrowing money from someone else in the family. Or, you could possibly borrow from a retirement account if it wouldn’t put your retirement in jeopardy.

Sell the property. The current loan balance may be less than the value of the property. So you would not want to compound the loss of the property with the loss of any equity. Six to 12 months is enough time to sell the house. The bank usually will give you the extra six months when trying to sell the property.

Bankruptcy is not an option to keep the house and eliminate the balance. If the lender has a valid lien against the home, bankruptcy will not wipe out that lien. However, there are many attorneys now filing lawsuits against lenders for poorly or illegally drafted loan documents. If this is the case with your lender, you might try this approach. While it won’t eliminate the loan, it might push the lender to work out a loan repayment or refinance. You would need to find a competent local attorney to review this option.

Finally, the bank cannot merely take back the property and kick you out the next day. It must still comply with the foreclosure laws in the state in which you reside. But you must act quickly. Six months can fly by, and the lender has no interest in waiting to recover its investment.

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