Reverse Mortgage Loan Blog

Thousands of Valley families have taken advantage of creative mortgages to pay for home improvements, vacations and medical bills.

But some of those creative mortgages are turning out to be nightmares for homeowners.

Horace Crain thought a reverse mortgage sounded like a good idea.

The World War II Navy pilot wanted to do some work on the home he owned outright, and the reverse mortgage was a way for him to cash in without having to make monthly payments.

Crain’s son, Charles, said Crain got about $13,000 cash with a monthly payout of $348.

After 12 years, Crain had borrowed $73,000 through the reverse mortgage.

At age 90, with a wife suffering from Alzheimer’s disease, Crain decided it was time to sell.

That’s when he got the surprise: the bank wanted him to pay back five times the amount he’d borrowed.

Crain found himself owing more than $350,000.

“I like to went nuts,” Crain said.

“We thought, ’somebody made a mistake. There’s an error, there’s a problem, there’s something wrong here,” Charles Crain said.

But sure enough, deep inside the 14-page contract Horace had signed at age 79, was the clause that said the bank was entitled to half the home’s appreciated value.

“It’s created a turmoil in our whole family,” Charles Crain said.

CBS 5 discovered that the loan company was the subject of a class action lawsuit over alleged fraudulent lending practices.

Since then, the federal government has rewritten the reverse mortgage rules.

“The government really stepped in and said, ‘this is not right,’” said reverse mortgage expert John Sellers.

Sellers says things are different now.

The exorbitant paybacks are over and client education is now a must.

“The last thing I want to do is have somebody 10 years later come back and say, ‘that guy didn’t treat me right,’” Sellers said.

But neither the change in mortgage rules nor the class action suit will help Crain.

He was forced to pay up, with no leeway from the bank.

“And that leaves me practically broke,” Crain said.

The number of reverse mortgages sold in Maricopa County last year was up 250 percent from the year before.

Experts say that under the new rules, it’s a smart option for seniors in some cases. There are now rules in place to protect the consumer.

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