Reverse Mortgages: Unintended Consequences

NYLAG has seen increasing numbers of reverse mortgage foreclosures in New York City and on Long Island.

Blog Post (New York)

Jessica Scholes
Huffington Post
November 3, 2016

Tags: Housing: Foreclosure

Organizations mentioned/involved: New York Legal Assistance Group (NYLAG)


Reverse mortgages are designed to allow older homeowners to convert some of the equity in their homes into a loan that will enable them to remain in their homes for the rest of their lives. After they die, their heirs have a year to repay the loan. Homeowners who opt for a reverse mortgage do not make monthly mortgage payments.

Instead, they take a lump sum payment at the time of closing, receive monthly installments, or use the proceeds to pay off an existing mortgage and receive no payments. They agree to be responsible for paying their homeowners insurance and property taxes. If they do not, or if they fail to meet a few other specific conditions, the bank can start foreclosure proceedings.

Shirley came to NYLAG in 2015 after she tried to pay her property taxes and discovered that Champion Mortgage, her mortgage servicer, had already done so without her consent. Champion was demanding that she repay thousands of dollars she did not have in unpaid property taxes and homeowners insurance. Worse, NYLAG discovered that Champion had instituted a foreclosure proceeding against her in court a year and a half earlier – without Shirley’s knowledge.