Jun 24, 2019
Detroit had 1,884 reverse mortgage foreclosures from 2013 to 2017, the highest number of any city in the country. It was certainly not alone; Chicago, Baltimore, Miami and Philadelphia rounded out the top five.
These types of foreclosures just add to the ways poor, and most frequently black, homeowners in Detroit have been forced out of their homes in huge numbers over the last couple of decades. The rate accelerated even more after the financial crisis of 2008. It’s a big reason behind the drop in Detroit’s population during this period.
Mortgage companies target homeowners having financial problems to offer them reverse mortgages. They claim they are a way to allow a homeowner to stay in their homes and borrow money based on equity they have accumulated over the years after paying down a portion of their mortgage loans. The arrangement “allows” the homeowner to stop making mortgage payments, so long as they continue to maintain the home and keep up on property taxes and mortgage insurance payments.
That’s the catch, however. One missed payment for property taxes or insurance can trigger a foreclosure. Also, when a homeowner moves out, whether because of death, financial difficulties or any other reason, they, or their families, are responsible for whatever is still owed on the mortgage. Some of this can be made up by the sale of the home, but with home prices in cities like Detroit declining, that doesn’t always help much. In addition, mortgage lenders add on fees of up to $15,000 to start the reverse mortgage process.
At one time, property taxes and insurance payments, at least in some cases, were simply rolled into the outstanding mortgage balance. This decreased the likelihood of a missed payment. This is no longer the case, however.
Reverse mortgages are just one more way financial institutions profit off of poor and working class people who start off hoping to own a home and pass something on to their children. With the wealth that working people create, we shouldn’t have to depend on these types of scams to know we and our families will have a place to live.