Mortgage Meltdown: Reverse Mortgages
Imagine this... Instead of making monthly mortgage payments to your bank, the bank pays you to live in your home. Sounds like a great deal but Contact 13 Chief Investigator Darcy Spears discovered, this component of Las Vegas' mortgage meltdown is nPhoto: Video by ktnv.com
Las Vegas, NV (KTNV) -- Imagine this... Instead of making monthly mortgage payments to your bank, the bank pays you to live in your home.
Sounds like a great deal but Contact 13 Chief Investigator Darcy Spears discovered this component of Las Vegas' mortgage meltdown is not all it's cracked up to be.
"I purchased my house myself before it was even built in 1986."
The passage of Linda and Tom Brumfield's time together is evident all around the home they shared for more than two decades.
"This was our first Christmas tree together," Linda says, gazing skyward at the huge Pine in her backyard. "I get inspiration from the tree. It makes me feel stronger sometimes when I need strength."
Linda's needed lots of strength lately to battle the mortgage-lending giant who she says is trying to take her modest, central valley home.
"For four years I've been tortured from them. I go to sleep at night and don't know if I can wake up in the morning and know that I'm gonna have my house."
In 2006, Linda and Tom got a reverse mortgage from Wells Fargo. In a regular mortgage, you make monthly payments to the lender. But in a "reverse" mortgage, you get money from the lender and generally don't have to pay it back for as long as you live in your home.
It's a way for people 62 and older to convert home equity into cash for things like medical bills, which is what Linda and Tom needed it for.
"Wells Fargo gave us $80,000 for the house and they said we could both live here until we died, which I believed."
But she says Wells Fargo didn't keep their word.
Darcy: Do you feel as though this is a bait and switch?
Linda: Oh absolutely!
Tom -- a World War II veteran -- was 62 long before Linda, so only he could qualify for the reverse mortgage loan at the time. But Linda says the bank made them a promise.
"They said that if we put the house in his name, then as soon as I turned 62 they'd just include my name on it for a service fee."
But Tom passed away suddenly in 2008, shortly before Linda turned 62.
"And when my husband died, everything changed. They wouldn't call me or anything, didn't get any response."
What she did get were foreclosure notices posted on her door even though they sent her a letter in 2009 saying she was eligible for the reverse mortgage.
Darcy: What made you not eligible?
Linda: Well, because they said my husband had passed away and he wasn't around to sign the papers to put me back on the reverse mortgage is what they told me.
Darcy: And that's just plain ridiculous!
Linda: I know it is!
Darcy: The man has passed. Do they not get that?
Linda: I guess not.
Letters from the bank tell her his death means it's time for her to pay off the loan, which is now close to $300,000 for a 1300-square-foot, 25 year-old home.
"It's a real, real tragedy," says Attorney Matthew Callister, who's filed multiple lawsuits over reverse mortgage loans like Linda's.
"Typically, and from what I've seen here, the cost of that loan is horrific. There's not just lots and lots of hidden fees and costs built into the loan..."
There's also lots he says banks don't tell borrowers.
"Invariably it's fraud in the inducement, fraud in the making of the loan," Callister says.
Linda's name isn't on the reverse mortgage loan, but Wells Fargo wants her to pay it off.
And even though her name is on the title of the house in a living trust, they won't put it on the mortgage.
"Not unless I pay $330,000, whereas a stranger off the street could come and buy it at the auction for $90,000."
And don't think she hasn't considered being that stranger.
But she says Wells Fargo warned her neither she nor any of her family members could buy the home at auction.
"I think they were very deceitful and they tricked us into this reverse mortgage. I do believe that."
In June, 2011, Wells Fargo stopped doing reverse mortgages. They blamed it on unpredictable home values and the economy, but said they'd continue to service existing customers.
Only they won't let Linda be one.
Wells Fargo is happy to be on TV during staged events to promote how they say they're helping homeowners. But when we start asking questions about homeowners like Linda who say they've been hurt, bank representatives won't get anywhere near our camera.
Callister will be working to help Linda fight to keep her home, "Because we recognize that this is a potentially predatory lending situation that's going on involving a senior citizen, that can very well constitute elder abuse."
While Linda waits and wonders what will come next, she'll keep going to that backyard tree where her husband's ashes are buried for the strength to fight another day.
Wells Fargo sent us a written statement, which says, "We work hard to keep people in their homes when they encounter difficulties. We view foreclosure as a measure of last resort. Wells Fargo continues to look at options that will allow Ms. Brumfield to stay in the home."
We'll be keeping in touch with Linda to see if they do let her stay.