Don’t Be Like Betty!
Betty Almost Lost House to Foreclosure
Learn how Betty almost lost her house to a Foreclosure and how she was able to refinance to a reverse mortgage. Betty’s story was almost tragic in the way it could have ended. Betty owned a house worth approximately $315K. When I met her, she only owed $25K. She had depleted all of her retirement funds and her only source of income was $800/mo. from Social Security. The house payment was almost $500/mo. and she had already missed the last month’s payment. Normally, that would have been the end of the story. The reverse mortgage is an FHA government insured mortgage program. As such, their guidelines do not allow for a 30 day late payment in the last 12 months. So in more cases than not, Betty would have been forced to sell her home, or face a nasty foreclosure process and lose her equity in the process.
Luckily for Betty, we were able to negotiate a loan modification with her current lender. That reduced her payment to a little less than $300/mo. She miraculously managed to make the next 12 months of payments on time and we were able to reverse her mortgage. On month thirteen, we refinance to a reverse mortgage. She took $10,000 in cash at closing. Her plan was to convert an ancillary unit on her property, to a full-fledged rental unit, by adding a kitchenette. She opted for the payments for life, which added $1103/month to her income. The $500 house payment was gone and she expected to get $1200/month for the detached unit conversion.
Net change – Living off of $300/month, to $3103/month – less taxes and insurance on the current property of $187, equaled $2916/month… a difference of $2616 per month. She was ecstatic! A month later she called to thank me, and told me that she bought herself the first new clothes she had had in over 4 years. Result – Her entire life changed for the better overnight! Now, I was ecstatic too!
Moral of the story – Why suffer? Don’t wait till it’s too late and you don’t qualify!!
FHA Disclaimer – The information in this article is based on an FHA HECM (Federal Housing Administration Home Equity Conversion Mortgage) mortgage product, which is a type of mortgage loan. There are fees associated with this loan as well as compounding interest. The loan is not a government benefit and must be repaid. There is no guarantee of financial security, and the consumer is responsible to pay the property taxes, homeowners insurance, and property maintenance fees independent of the loan, which can be a significant cost. The consumer faces a risk of foreclosure if they do not meet these obligations. For more information about the FHA HECM reverse mortgage product visit
http://portal.hud.gov/hudportal/HUD?src+program_offices/housing/sfh/hecm/hecmabout
Finally, the names and terms of the above scenario have been changed and modified to protect the consumer’s privacy.