How many Lansing-area seniors have risked losing their homes to reverse mortgages?

Sarah Lehr
Lansing State Journal

LANSING — Senior citizens in two south Lansing ZIP codes were disproportionately likely to be foreclosed upon after taking out a federally insured reverse mortgages.

Home Equity Conversion Mortgages allow homeowners who are least 62 years old to avoid making mortgage payments. Instead, seniors get monthly cash advances by drawing upon the value of their home's equity.

Reverse mortgages can be beneficial for seniors who could use a little extra cash and want to continue living in their homes.

Borrowing fees are often steep, however, and homeowners risk foreclosure if they fail to keep up with costs like property tax, home repairs and insurance.

"I'm not saying they're a bad thing," Gary Bauer, a law professor who has specialized in estate planning through the "Sixty Plus" elder law clinic at Western Michigan University's Cooley Law School, said of reverse mortgages. "I'm saying proceed with caution."

Read the USA TODAY Investigation: 

Seniors were sold a risk-free retirement with reverse mortgages. Now they face foreclosure.

Middle-to-low income ZIP codes and areas with higher percentages of black residents were hit especially hard by reverse mortgage foreclosures during the aftermath of the Great Recession, a USA TODAY investigation found.

Three Detroit ZIP codes ranked among the nation's ten highest for HECM foreclosures between 2013 and 2017. In Michigan, all 10 of the state's most impacted ZIP codes were in Detroit. 

The numbers were much less drastic in Ingham, Clinton and Eaton counties, although there were outliers south of Interstate 496 within the city of Lansing.

Harder-hit areas in south Lansing

Seniors in one south Lansing ZIP code, 48910,  were hit especially hard.

Fifteen households in that ZIP code, which has median household income between $40,000 and $50,000, were foreclosed upon within a five-year time period after homeowners took out federally-insured reverse mortgages.

The area's foreclosure rate was about 3.5 per 1,000 seniors. That’s nearly double the national average of 1.9 foreclosures per 1,000 seniors.

Most of Lansing's 48910 ZIP code is south of the Grand River and north of West Jolly Road, bounded by Pleasant Grove Road to the west and U.S. 127 to the east.  The land includes part of REO Town and spans the Moores Park, Old Everett and Forest View neighborhoods.

The area's population, which is 63% white and 17% black, roughly mirrors the racial makeup of Lansing as a whole.

Just south and west of that, ZIP code 48911 had 11 foreclosures from Home Equity Conversion Mortgages, the second highest number in the Lansing area over 2013 through 2017.

Median household income in ZIP code 48911 ranges from $30,000 to $40,000. The area's population is 50% white and close to 29% black.

Nationally, the average number of foreclosures per ZIP code was just over six, according to analysis of U.S. Department of Housing and Urban Developmentdata obtained by USA TODAY.

The effects of these foreclosures reverberate across neighborhoods.

"Foreclosures are obviously devastating for the person who's losing a place to live," said Rawley Van Fossen, executive director of the Capital Area Housing Partnership, a non-profit focused on affordable housing and financial security. "They're also felt across communities where property values tend to decrease as a result."

This report is based on an analysis by USA TODAY in partnership with Grand Valley State University, with support from the McGraw Fellowship for Business Journalism.”

Katrina Maddox, a HUD-certified Home Equity Conversion Mortgage counselor, explains that reverse mortgage loans are not for everyone, Tuesday, April 9, 2019, at the Center for Financial Health, Lansing, MI.

Tips for taking out a reverse mortgage

Is a Home Equity Conversion Mortgage right for you? Local experts have the following tips.

1) Take counseling seriously

Federal regulations, adopted in 2010 under the Dodd-Frank Act, require a borrower to consult with a HUD-approved counselor before taking out a Home Equity Conversion Mortgage.

It's a red flag if your lender presents counseling as a "just a box to check" or pressures you to get counseling over with quickly, said Denise Keiser, executive director of the Center for Financial Health, a Lansing-based nonprofit that employs HUD-certified reverse mortgage counselors.

To find a counselor near you, call HUD's hotline at (800) 569-4287.

2) Be wary of misleading ads

Consumers should be leery of advertising that overstates the benefits of reverse mortgages, Keiser warned.

"One should never buy a financial product from an infomercial," she said.

Reverse mortgages won't get you "free money." The monthly payments you receive come from tapping into your home's equity. The amount of money you'll receive is not guaranteed, since your home's value could decrease over time.

3) Involve family members

Potential borrowers should strongly consider involving family members with the reverse mortgage process, said Katrina Maddox, a reverse mortgage counselor at the Center for Financial Health.

Your children should be aware that they may not be able to inherit your home if you take out a reverse mortgage. Your heirs may be able to keep your home, however, if they pay off the rest of your reverse mortgage loan upon your death.

Other issues can arise if a spouse is under 62 and cannot be listed as a borrower when an older husband or wife takes out a reverse mortgage.

If you're a non-borrowing spouse, you can still be protected from foreclosure even if your partner dies. If you want to keep the home, you'll need to reach out to the lender within 90 days to establish your legal right to the home. Among other requirements, you'll have to prove the home is your primary residence.

4) Consider alternatives

Reverse mortgages aren't right for everybody.

If your finances are tight, consider alternatives like downsizing or a second mortgage. If you want to continue living in your home, one option is selling your home to a family member a paying rent to live there until you die.

Local resources

            (888) 632-7663

            3815 W. St. Joseph St., C-200, Lansing 48917

     Resources: Reverse mortgage counseling ($150/session), Foreclosure      prevention services (free)

  • Legal Services of South Central Michigan

        (517) 394-3121 or (800) 986-0044

        3490 Belle Chase Way, Ste. 50, Lansing 48911

    Resources: Free legal advice to low-income individuals and senior citizens on     issues including foreclosures

More:

Why south Lansing demands a second look

From 2009: Interstate 496 construction left a complicated legacy

Contact Sarah Lehr at (517) 377-1056 or slehr@lsj.com. Follow her on Twitter @SarahGLehr.