Even The Wall Street Journal Misunderstands Reverse Mortgages

Are you confused about reverse mortgages?  Well, don’t be ashamed.  A recent article in the Wall Street Journal (WSJ) entitled, Older Borrowers, Out in the Cold which describes the challenges that many senior homeowners are facing with their mortgages and the lack of solutions that the government provides for senior homeowners.  The article and author analyzes that many were taken advantage of by putting them into easy, no document loans as well as loan that have high fees and adjustable rate mortgages.  The article briefly discusses reverse mortgage and if you read the article the day it was published you would’ve seen the following:

wsj

Meanwhile, people like Mrs. Couts are facing foreclosure. After her husband died in 2005, she took out a reverse mortgage, a deal available only to people 62 or older with substantial equity. It’s actually a sale of your home to a bank, which then pays you a lump sum or a monthly income and receives the property after your death. The arrangement enabled Mrs. Couts to stop making mortgage payments so she could afford to remain in her home on her $913 a month in Social Security.

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This information is plain wrong and reverse mortgages aren’t a sale of your to a bank and it turns out the WSJ heard about it… the next day, the WSJ published a correction and the article now reads:

Meanwhile, people like Mrs. Couts are facing foreclosure. After her husband died in 2005, she took out a reverse mortgage, a deal available only to people 62 or older with substantial equity. With a reverse mortgage, a bank makes payments to a homeowner, and the homeowner keeps control of the house and doesn’t have to pay back the money as long as he lives there. The loan is repaid, with interest, when the borrower sells the house, moves out or dies.  The arrangement enabled Mrs. Couts to stop making mortgage payments so she could afford to remain in her home on her $913 a month in Social Security.

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Even if the writer is from the Wall Street Journal, she should have done a little more homework on reverse mortgages before throwing the product under the bus without fully understanding the references she was making.  To err is human, to correct is divine.

For the full article, click here.