Arlene Hill needed a financial lifeline. She thought a reverse mortgage would provide it.
Now the 82-year-old widow is fighting to keep the home she has lived in for 45 years.
Regulators have long been concerned that reverse mortgages — a type of home loan that allows older homeowners to access the equity in their homes and defer payment until they die, sell or move out – can put homeowners like Hill in financial peril. All too frequently, they say, brokers don’t clearly outline the potential risks of such an arrangement and homeowners don’t understand what they are buying.
Hill says that she was both confused about the terms of the reverse mortgage she took out on her Simi Valley, Calif., home and misled by a broker who was eager to close a sale.
In 2009, with her husband, Herb, unable to work after suffering a stroke and the onset of dementia and their $345,000 interest-only mortgage on their house due to require principal payments soon, Hill listened when a telemarketer cold-called her to pitch a reverse mortgage.
“I thought, ‘Gee, that would be just wonderful,'” she told NBC News.
At closing, however, the deal got more complicated: In order to qualify for the loan, the broker told her, the Hills would need to pay $180,000 – roughly 90 percent of their savings – to reduce the debt on the home. And Arlene Hill would have to remove her name from the title so that they could qualify for a bigger reverse mortgage based on her older husband’s age.
The broker assured her that she could easily be reinstated onto the title. “He said, ‘Listen, we do it all the time.’ He assured me of that,” Hill said. So with the broker on the phone, “I sat there at the kitchen table along with … the notary, and my husband signed all the papers,” she said.
Three years later, after Herb had died, Hill discovered the broker had failed to tell her that getting her name restored to the title would be costly and wouldn’t happen automatically, as she had been led to believe. “I was just shocked and I called them and said, ‘You must’ve made a mistake,'” she said.
Without her name on the title, she discovered, she no longer had any legal claim to the property. “I gave that money thinking I was going to be protected in my home,” she said.