Water shut off without notice, a letter addressed to a deceased mother, a loan that never should have been granted.
Even heirs who want to pay off reverse mortgages to hold onto a family home, and have the means to do so, can find themselves stymied by a seemingly endless cycle of conflicting messages that stretch out for years.
That’s according to some of the more than 100 tips and letters received by USA TODAY after its probe into a surge in reverse mortgage foreclosures issued just after the recession.
Reverse mortgages allow homeowners to borrow against the equity in their homes and stay in place mortgage-free until they pass away, while giving their heirs the option of paying off the loan to keep the properties or sell them. That’s not how it worked out for the people who reached out to USA TODAY.
The roadblocks they faced varied widely – from paperwork errors to messy titles – but all of them had one thing in common: a desire to keep the property in the family.
"My great, great grandfather owned this property (beginning in) 1909,” said Latoya Gatewood-Young, who has battled for four years to purchase the family home in Maryland. "To think that it could go up for sale at an auction is pretty disturbing to me."
Most issues can be traced back to faulty loan servicing with an often-revolving cast of loan companies – the administrative duties of what should be routine disbursements, interest calculations and communication with borrowers or heirs, said Sarah Bolling Mancini, an attorney with the National Consumer Law Center.
“It’s a common problem largely because servicers don’t do a good job of providing clear information to regular people,” Bolling Mancini said. “The system is set up, and these families should have options to satisfy the loan, rather than lose the home.”
Housing and Urban Development regulators downplayed any widespread pattern of poor servicing after borrowers die but acknowledged that individual cases can have outsized impacts on grieving families.
After a borrower dies, heirs often find themselves confused or hostile that a lender is "ripping them off," said Mathius Marc Gertz, a broker at WestCal Mortgage Reverse, who counsels families to work out a plan while their parents are still alive.
"I advise adult children to ask their parents: 'Do you have a reverse?' and get involved on what your procedure will be to pay it off, either by getting a date-specific payoff amount or deciding on who will list the property to sell it," Gertz said. "A high percentage of cases hit snags, but that's because people are reactive and it becomes a big bugaboo."
Fifth generation struggles to retain Maryland roots
Reverse mortgages came with no income or credit requirements a decade ago, leading a wave of brokers to write loans to borrowers who turned to them as a financial last resort, to pay for home repairs or pay off debts.
Servicing disputes that emerge after the death of a borrower sometimes reveal that loans should not have been issued in the first place.
USA TODAY's analysis of reverse mortgage lending patterns and foreclosures found clusters in African American urban communities – evidence of predatory practices, according to industry watchdogs. The work was a partnership with Grand Valley State University, with support from the McGraw Center for Business Journalism. In recent years, the U.S. Department of Housing and Urban Development has mandated stronger financial assessments of seniors before a loan is issued.
When Gatewood-Young's grandfather died in 2016, the family was surprised to discover that his rural Maryland home on 10 acres had a reverse mortgage lien against it. He had drawn down about $150,000 with his reverse mortgage – a sum that had to be paid back for the property to be transferred to his family.
“The executor of his estate was my aunt, and (she) explained that Wells Fargo had already communicated that if we did nothing, it would go into foreclosure,” Gatewood-Young said. “I said, ‘Absolutely not.’ ”
Gatewood-Young, the only heir interested in the property, got herself qualified for a traditional home loan and started the purchase process.
That’s when 200 pages of title history arrived showing that her grandfather held only a one-fifth ownership stake in the property. It was unclear who owned the rest.
Ever since, the lender has been referencing an impending foreclosure, due to the death and non-repayment of the reverse mortgage.
Even after a court fight to resolve the title dispute, several expired appraisals, costly upkeep of the property and complaints to a string of lenders, servicers, regulators and even her congressman, Gatewood-Young has not been able to buy the family home. The latest dispute with Champion Mortgage: a final purchase price that has jumped more than 30%.
“This property means the world to me, and you can see in the documents there is no way my grandparents should have qualified for a reverse mortgage,” Gatewood-Young said. “I call it predatory lending.”
Gatewood-Young took her case to the Consumer Financial Protection Bureau as well as her congressman, Rep. Andy Harris, R-Md., who set off a congressional inquiry at HUD, alleging shoddy loan origination and servicing.
In a January 2017 response to her complaint, Wells Fargo and the new servicer, Champion Mortgage, denied any wrongdoing and said a foreclosure had been paused while the title issues were sorted out by their attorneys. Gatewood-Young continued fighting in court, finally clearing the title this fall. All that remained was the purchase price dispute.
After USA TODAY contacted Wells Fargo about Gatewood-Young's case in December, the bank changed course, saying it will write off more than $30,000 in costs, allowing her to pay off the loan at its 2016 balance.
“She’s been working diligently all along, and it was a complicated issue,” bank spokesman Tom Goyda said. “Once we were made aware of the specifics, we were able to get it resolved.”
NJ home at auction despite family’s wishes
When Grace Bonnicelli thinks of reverse mortgages, she remembers a particularly troubling knock on her mother's door in 2018. A man asked her sister, “Is this house for sale?”
She quickly told him no, and he apologized but mentioned that he had seen the posting in the newspaper, Bonnicelli recalled.
The reality was even worse: Not only was the home listed for sale, it had been sold back to the bank at a sheriff’s sale the previous day.
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Bonnicelli of New Jersey said her mother had a series of mini-strokes, which impaired her memory. She missed tax and insurance payments on the family home, on which she had taken out a reverse mortgage in 2009.
Those missed payments pushed the loan into default and led the servicer to demand the full $200,000 owed.
The knock at the door was the first Bonnicelli knew of the problem and she, along with her family, sought to fix it. Then came the eviction notice.
“There was no negotiation; they were soulless, heartless,” Bonnicelli said of the loan’s servicer, which was Champion Mortgage.
Champion did not respond to requests for comment from USA TODAY.
The family hired an auctioneer to sell the family’s belongings to help pay for her then-86-year-old mother’s long-term care facility. They fought for a two-month delay to allow time for the sale and move.
A Champion attorney argued against the delay, saying taxes were late dating back to 2012, which could have triggered a foreclosure years earlier.
“We object to any delay in the removal of the Defendant, the former owner of the property,” the attorney wrote. “She should have been aware that her time in the property was coming to an end as early as December 2012, yet did not take steps to locate a new place to live until August 2018, after the property was already sold at sheriff’s sale.”
A judge disagreed and granted more time for the move, through last January.
In April, the family spotted the home on a “real estate-owned” auction site and was able to buy it back, renovate it, then sell it again over the summer.
“We did it partially to spite them,” Bonnicelli said.
Daughter worried family home will be sold from under her
As an attorney with the Legal Aid Society of San Diego, Alysson Snow has handled a lot of complex property disputes. But she has only one word to describe a case she’s currently handling: Crazy.
Starting in 1996, her client, Joanne Diener, lived with her father in his Oceanside home. He passed away six months ago. Within 24 hours, the lender called Diener about the reverse mortgage and the potential for it to go into default.
She sent in a form indicating she wanted to purchase the property and got approved for traditional financing, only to receive a notice of default anyway. That was just the beginning.
More in this series
The loan servicer assumed the home was empty, posting a neon green sticker that read, "This property was found VACANT" on her door, triggering a chain of events usually taken to secure abandoned properties.
“Four days later, she came home to a notice of abandonment – in the same home she was living in and receiving letters from the lender,” Snow said. “The next day, a notice of trustee sale was posted for the home, and her water was turned off for purported weatherization. It was 90 degrees.”
Snow is filing legal documents with San Diego County court officials trying to slow down a foreclosure, which can happen quickly under California law. The four-bedroom house is scheduled to be sold at auction at the end of this month. Anyone can view it on sites such as Zillow, where it is listed as a “pre-foreclosure.”
Snow said the lender pushed the home toward foreclosure before Diener had a chance to indicate her wishes and prove she had the financing.
“It’s crazy what they’re trying to do to get her out of the house,” Snow said.
A representative for the lender, Reverse Mortgage Funding, said she could not comment on the case, citing privacy concerns.
Diener said she felt like the lender tried to steal the home she lived in for 23 years.
“I felt robbed,” she said. “I would describe it as a horror show that would not end.”
Long Island estate slips away
Darrell Emile moved in to care for his ailing mother, Alice, in 2005. Twice they met with a HUD counselor while contemplating a reverse mortgage on the Freeport, New York, home.
Emile said they were assured that after his mother died, he would have at least six months to select a payoff option and remain in the home, plus two three-month extensions if needed.
That assurance follows a “6/3/3” guideline from HUD, which expects loan servicers to inform survivors and heirs of their options and clear the loan within six months of a death. That guideline does not bar a foreclosure during that time.
When Alice died in 2009, Emile knew he wanted to keep living in the bi-level ranch home his family had owned since 1965. Property values had plummeted in the wake of the recession, making an immediate sale unappealing.
He planned to pay the mortgage’s balance back with cash. In 2009, that balance was roughly $144,000, and the home was worth about $325,000.
Emile was meticulous: He notified Bank of America on the first business day after his mother’s death and asked about his options. Letters quickly started arriving addressed to “the estate” of his mother, according to copies provided to USA TODAY.
10 questions to ask about reverse mortgages
Experts suggest seniors and their family members have an open discussion about these topics before they apply for a reverse mortgage. Here is a downloadable guide to help start those conversations.
Statements showing a growing loan balance kept arriving, too, along with a request to verify that his deceased mother still lived in the home. Interest accrues on reverse mortgages until the day they are paid.
Emile called, emailed, sent letters and visited his Bank of America branch. Finally, a full year after his mother’s death, he received a notice of his options for resolving the loan.
He promptly requested a payoff quote – what he would need to come up with to stay put. It didn't show up for five years, long after a foreclosure notice had landed.
“I remember thinking this must be a mistake, someone just not understanding something, and we’ll get it sorted out,” Emile said. “It was just insane.”
That kicked off a legal tussle that cost Emile attorney fees and five more years – all while his mother’s reverse mortgage continued to accrue fees and twice switched loan servicers when banks sold the loan.
Emile filed complaints with New York banking regulators and the CFPB in 2013. They mandated that the bank provide a written response but didn’t resolve Emile’s issues.
In documents Emile provided to USA TODAY, Bank of America acknowledged receiving Emile’s letters asking to pay off the loan but faulted him for a clerical error in his request. Plus, the bank argued, the loan had been sold off from the bank’s portfolio years ago, as part of its exit from the reverse mortgage business in 2012.
Representatives from Bank of America did not answer questions about Emile’s case.
With funds from Alice Emile’s estate dwindling, Emile and his family decided to shift plans and sell the home. That plan failed, too, when the home didn’t immediately sell.
By 2015, the loan balance had ballooned to $161,000. That was the year an attorney hired by the new servicer, Reverse Mortgage Solutions, followed through on the foreclosure filing, and a judge granted a seizure and short sale, for $250,000.
Today, the home’s market value is more than $400,000.
The outcome left the family with nothing. Emile now rents in Philadelphia. He feels cheated by the long process.
“The beginning of all this with the loan worked OK; we remodeled the home, made it safe for my mom,” Emile said. “But after she passed, they were supposed to allow us to maintain some financial stability, and that all totally went away.”
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Livingston, Mich.: How many Livingston seniors risked losing homes to reverse mortgages?
Battle Creek, Mich.: See the neighborhoods where reverse mortgages have failed.
This article originally appeared on USA TODAY: Reverse mortgages leave families battling for property after death