Column: He promised his wife he'd keep the house. Then he took out a reverse mortgage
There is nothing grand about the white one-story house in the middle of Roxbury Drive in San Bernardino, particularly in its current state of disrepair.
But to Juan Gutierrez, that house is home. As a young man he worked in construction, saved up for a down payment and, in 1968, bought the three-bedroom house where he and his wife raised their three children.
And then, in 2014, he was evicted as part of a dispute with his reverse mortgage lender that continues to this day. It’s a kind of dispute that could become more common in coming months, as COVID-19 pushes more seniors to the brink of financial disaster, prompting some to resort to reverse mortgages even as others default on them.
So deep is Gutierrez’s pain over the loss of his house that on some days he travels from his nearby apartment to Roxbury Drive just to sit outside the abandoned house. He watches the comings and goings on the street, imagining himself back home.
Weeks ago, when I met him there, Gutierrez sat in a chair on the front porch. Behind him was a boarded-up window and a red tag warning visitors not to enter the condemned property.
Gutierrez, 77, leaned on his cane, lifted himself from his chair and walked gingerly through the front yard to the sidewalk. He pointed out the paving work he had done decades earlier, when he was young and healthy, before a work accident left him disabled with no income other than disability insurance.
His 54-year-old son, Raul, who was at the house with his dad on the day I visited, told me his father is determined to honor a vow he made many years ago, before his wife died of cancer.
“He told my mom he would keep the house in the family forever,” said Raul.
But that’s a matter the courts will decide. Gutierrez sued his lender in 2018, alleging fraud, breach of contract and elder abuse. The lender has denied all the allegations and asked that the case be dismissed, but Gutierrez is still hoping to have his day in court.
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If you turn on your television for an hour or more, you’re likely to see actor Tom Selleck serving as pitchman for a leading lender and promising that “a reverse mortgage loan isn’t some trick to steal your home.” And it's true that a reverse mortgage can be a great way for people 62 and older to pay their bills and stay in their homes longer. The homeowner essentially borrows against the equity in the house, and when the owner dies, the loan must be paid back by surviving relatives or heirs. If that’s not possible, a common way to settle the debt is to give the house to the lender.
But reverse mortgages have also been a source of controversy, and some lenders have been criticized and fined for failing to disclose the risks as well as the benefits.
The fine print is considerable on reverse mortgage contracts, and each year, scads of them end up in default. Housing advocates tell me that some homeowners aren’t clear on the fact that they are still responsible for paying taxes and insurance on their property, or that those costs may increase.
Joanne Savage of Legal Counsel for the Elderly, an AARP affiliate, told me low-income people of color are often involved in reverse mortgage defaults in Washington, D.C., where she represents homeowners, and she anticipates more defaults after COVID-related eviction moratoriums are lifted.
Savage said that today, with so many seniors financially affected by the pandemic, new protections for elderly homeowners may be necessary, especially given the scarcity of affordable housing for those on fixed incomes.
When I outlined the events leading to Gutierrez losing his home, San Francisco attorney Ingrid Evans, who specializes in elder abuse and financial fraud, was unsurprised.
“It happens all the time,” Evans said. She couldn't comment on the specifics of Gutierrez's situation but noted that some “lenders are ridiculously aggressive … and always looking for loopholes, and they will foreclose in a minute.”
Evans said destitute homeowners often have trouble finding affordable legal help, and even if they do, they’re up against teams of corporate hired legal guns who work for some of the nation’s biggest financial institutions.
Beverly Hills litigation attorney Michael Waddington, who represents Gutierrez, said he found out about the man's plight through an acquaintance and took on the case four years ago. Gutierrez lived in his car and couch-surfed for a while after losing his home. For the last two years, he has been staying in an apartment paid for by Waddington's law firm.
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To back up a bit, Gutierrez bought that house in better times, when he made a good living. But late in 1968, the same year he bought the house, his construction company was laying underground pipes for a shopping center in Big Bear when a cave-in buried him. Gutierrez told me he was pulled from the rubble with bones in his lower back and pelvic area crushed. Both knees were injured as well, and he was permanently disabled.
The family survived for decades on Gutierrez’s disability insurance, but the budget was always tight. As the house aged, Gutierrez couldn’t keep up with maintenance costs. When he saw ads for reverse mortgages being offered by Bank of America, he thought his financial troubles were over.
For Gutierrez, who took out a $60,000 reverse mortgage with Bank of America in 2009, the benefits were many. He still had to pay the monthly taxes and insurance on his property, but having so much cash in hand made it possible to pay for things he couldn’t previously afford.
“I fixed the roof … bought a used car, painted the house inside and out, widened the driveway,” Gutierrez told me.
But three years after he signed the contract, Bank of America handed off the mortgage to Nationstar Mortgage and the related Champion Mortgage Co. The new lenders claimed Gutierrez was behind in his insurance payments and needed an additional insurance policy, according to Gutierrez and his attorney.
Waddington called this a case of David and Goliath, saying Gutierrez was evicted from his own house without cause. Nationstar Mortgage argues in court documents that Gutierrez violated his contract by missing scheduled payments, despite many attempts to negotiate a new payment plan with him. The company also says Gutierrez filed the suit after the statute of limitations had expired. A media representative for Nationstar told me the company does not comment on pending litigation.
Gutierrez says he was unaware that Bank of America had passed off his reverse mortgage to another company, and he was confused about the mail from Nationstar and Champion, assuming it was unwanted solicitations. Gutierrez told me he thought that under the terms of his contract, insurance payments were covered by Bank of America. But when the new mortgage holder convinced him that was his responsibility and he was in arrears, he agreed to a monthly repayment plan.
Gutierrez says he made the new payments, but Nationstar argues in court documents that Gutierrez did not return a signed copy of that new repayment agreement in a timely fashion. Bank documents indicate that while Gutierrez was trying in good faith to comply with the new requirements and payments, Nationstar had already begun foreclosing on his property.
The house was sold while Gutierrez was still living in it, Waddington says, and the new owners went to court to evict Gutierrez, who was removed by police. For reasons that are unclear to Waddington and not specified in court documents, the sale was rescinded.
When Gutierrez found that out, and learned that the buyers had vacated the property, he moved back in to his home, which by then had been gutted for remodeling, with plumbing and electrical systems ripped out. The house was condemned because of the condition it was in, and Gutierrez, who couldn't afford to fix it up, was once again booted.
You'd think Gutierrez's nightmare couldn't get any darker, but it has. Waddington says Gutierrez is still technically the owner of the house on Roxbury Drive, and the state and the city of San Bernardino are suing him to bring the damaged property up to code. The lender, meanwhile, is billing Gutierrez for taxes and insurance, as well as compound interest on the debt, with an unpaid tab now in excess of $100,000.
“He was wrongly kicked out of his own home, which was then destroyed ... and they’re still sending him bills for a house he can’t live in because it was condemned by the city,” said Waddington.
Gutierrez told me that as long as he’s able, he’ll fight for the right to go home.
The bottom line is that reverse mortgages may be great for some borrowers. But they're also complicated, and no one should enter into one without understanding all the terms. For information on reverse mortgages, talk to a financial planner or review information at the National Council on Aging (go to NCOA.org and click on Home Equity) or the Consumer Financial Protection Bureau (go to consumerfinance.gov and click on Consumer Education, then on Reverse Mortgages.
This story originally appeared in Los Angeles Times.
