Henry Winkler is an award-winning actor and children’s book author. He’s also reverse mortgage spokesman, but I’m sure he’s not going to tell you this story when you see him on his next commercial.
I just read about an interesting case regarding reverse mortgages. The story goes like this: A California woman took out a reverse mortgage in 2005 to help pay her expenses while remaining in her home.
The move seemed smart at the time. But since her death in January 2010, it’s become a major legal headache for her son, who now faces foreclosure and eviction.
Recently, the son, who is 66, filed a federal class-action lawsuit against Wells Fargo Bank, accusing it of violating federal rules and pushing reverse-mortgage homes into foreclosure rather than allowing relatives to buy them.
Reverse mortgages are, and always have been, a potential legal minefield for borrowers, and need to be carefully vetted by an attorney who is expert on the subject before any client enters into such an agreement.
The legal fight swirls around on a little-known requirement that allows spouses or heirs to purchase properties at 95 percent of appraised value after the death of the original borrower. I must confess I wasn’t aware of this.
The son’s legal case alleges that Wells Fargo never told him of his right to buy the home at the appraised value. He alleges he was informed that he had to fork over a higher price in order to pay off the remaining and bigger reverse-mortgage balance.
My advice: be very careful if you’re applying for a reverse mortgage. And please read the fine print. Better yet, hire yourself a good lawyer.
File Under: No “Happy Days” here, Fonzie.