Help for Older Homeowners in Foreclosure

Older homeowners facing foreclosure have resources not available to younger debtors.

The Older Americans Act of 1965

The Older Americans Act of 1965 (OAA) created the Federal Administration on Aging which, in turn, funds state Legal Aid offices to assist older Americans with legal issues, including foreclosure. Because of this law, most jurisdictions offer Seniors free legal assistance with foreclosure. You can go to the Department of Health and Human Services web site to find resources in your area. You can also locate your local Legal Aid office on the Legal Services Corporation website. These offices and your local administration on aging offer plenty of resources and assistance with mortgage problems and other issues.Their purpose is to make sure you are getting the benefits you are entitled to, which can free up your money to pay the mortgage.

Reverse Mortgages

Taking out a reverse mortgage is one option for older homeowners seeking to avoid foreclosure. This type of loan is only available to borrowers who are 62 years old or more. A reverse mortgage is different from an ordinary mortgage because it pays the owner of the property. You borrow money, in this case, to pay off your existing mortgage, and the lender takes a lien against your property. You do not make any payments. You get to stay in your home as long as you live. While you are alive and living in the home, interest accrues. When you pass on, move out, or sell the home, the mortgage balance becomes due. Neither you nor your heirs are responsible for any shortfall if the mortgage balance exceeds the value of the home. However, reverse mortgages are not for everyone. They are taken out in the expectation that the mortgage balance will increase. That means you can’t get a loan for the full value of the home. How much you can get will depend on several factors, including your age at the time of the loan. In addition, you will not be able to own the property with anyone who is younger than 62, which may complicate estate planning.

Case Studies: Empowering Older Homeowners in Foreclosure

Case Study 1: Mary’s Legal Aid Assistance

Mary, a 70-year-old homeowner, was facing foreclosure due to financial difficulties. She reached out to her local Legal Aid office, which was funded by the Federal Administration on Aging under the Older Americans Act of 1965.

Through their free legal assistance program, Mary received expert guidance and resources to tackle her mortgage problems. With the support of Legal Aid, Mary was able to secure the benefits she was entitled to, freeing up her finances to pay off her mortgage.

Case Study 2: Robert’s Reverse Mortgage Solution

Robert, a 65-year-old homeowner, found himself at risk of foreclosure and sought alternatives to save his home. He decided to explore a reverse mortgage, a specialized loan available to homeowners aged 62 or older. By opting for a reverse mortgage, Robert paid off his existing mortgage and received funds from the lender while still being able to reside in his home.

As he continued to live in the property, the mortgage balance accrued interest. When Robert eventually passed away, moved out, or sold the home, the mortgage balance would become due. With a reverse mortgage, Robert and his heirs were not held responsible for any shortfall if the mortgage balance exceeded the home’s value.

Case Study 3: Barbara’s Estate Planning Considerations

Barbara, a 63-year-old homeowner, faced foreclosure and considered a reverse mortgage as a potential solution. However, she discovered that reverse mortgages come with certain eligibility requirements and restrictions.

One crucial factor was that the property owner must be at least 62 years old, which posed challenges for Barbara’s estate planning since she wanted to co-own the property with her younger partner. This realization prompted Barbara to seek alternative options to address her mortgage problems while taking into account her estate planning goals.