Posted: December 31st, 2009 | Author: Joe | Filed under: Debt, Tips | Tags: Debt, debt management, debt settlement, Reverse Mortgage | 1 Comment »
What can you do when you don’t have health insurance and you can’t pay your medical bills that have been sent to a collections agency?
Well, that’s the question recently fielded by Bankrate.com’s Justin Harelik.
The reader’s mother has been dealing with bills for her open-heart surgery that were sent to collection in 1996! She worked with the collectors to lower the monthly payments to something she could afford on her social security payments, but now the agency is expecting her to pay the full $20,000 outstanding balance. This seems incredibly unfair, since she’s paying them in good faith and they are cashing the checks, but apparently it is perfectly legal for them to do.
Here are the 4 options laid out by Mr. Harelik:
Negotiate a settlement with the collection agency.
The upside: She could get a significant amount of the debt eliminated.
The downside: The agency would likely demand a large lump sum payment that she probably doesn’t have.
File for bankruptcy.
The upside: It would eliminate the debt obligation completely.
The downside: It would cause some damage to her credit history and she may need to hire an attorney, depending on what assets she may have.
Take out a reverse mortgage.
The upside: She gets monthly payments based on the current value of her home, and can make larger payments to the collections agency.
The downside: She would have to own her home outright (with no current mortgage), it could be a costly and time consuming process to put in place to meet the requirements of the collectors. A reverse mortgage would also decrease the amount she could make by selling the property, and leave less to bequeath to relatives upon her death..
Hire a law firm to protect her Social Security checks.
The upside: She doesn’t have to worry about the collection agency placing a levy on her bank account and taking the payments before she has had the chance to spend the money on heat and food bills.
The downside: It will cost a lawyer’s fee and she will still have to make monthly payments to the collection agency to pay off the debt.
Given the list with the pros and cons, it’s easy to see why Mr. Harelik recommended option 4. 
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Posted: March 17th, 2009 | Author: Joe | Filed under: Real Estate, Scam | Tags: Bad deal, Reverse Mortgage, Scam | 12 Comments »
Reverse mortgages have gotten a lot of buzz over the past 6 years or so, but are reverse mortgages a good thing?
Are reverse mortgages a good thing?
First of all, to answer that question, you need to know exactly what a reverse
mortgage is. A reverse mortgage is a home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can then be paid to you.
Sounds great, right?
Well, maybe not.
There’s the little matter of paying this money back. You see, it’s not truly the reverse of traditional mortgage. If it were, you would “loan” the bank your equity stake in the home in exchange for monthly payments to you until that equity “loan” was paid off. At that time, the bank would lay claim to the full value of the home. But in a reverse mortgage, you get to live in the home as long as you can make tax and insurance payments on the home. When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.
There are literally hundreds of disreputable individuals and companies who use reverse mortgages as a scam. They load them up with so many fees, that you really end up with very little left in payments and you or your heirs may even owe more once the home is sold!
One such company, Financial Freedom Senior Funding Corporation, was hit by a lawsuit for their hard-sell tactics. The suit essentially alleges that they scammed seniors out of their homes and equity, pushing them to use the money for the “special things you’ve always wanted to do, such as travel or hobbies.” Financial Freedom Senior Funding Corp. also encouraged seniors to take out the maximum allowed under the law, regardless if it was wise, and even engaged insurance agents to sell insurance products on top of the reverse mortgage, tacking on more fees.
Despite this, the company sports a rating of C from the BBB and has 0 complaints in the past 36 months.
It sounds like reverse mortgages are not such a good deal. I suppose they would be for seniors who have no heirs and don’t plan on ever selling their home, but that may not be the most responsible thing to do.
For more info on Reverse Mortgages, head over to the U.S. Department of Housing and Urban Development website.
Photo by docsplatter
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