Senior Citizen Facing Home Foreclosure Rescued by
Unusual Reverse Mortgage Transaction
Wall Street Journal reports on tactic being used to
help some seniors about to lose their homes
Pedro Garcia
was able to stay in his Southern California home after his
mortgage lender wrote down the bulk of his loan and issued a
reverse mortgage for the balance. Jeff Clark for
The Wall Street Journal
Oct. 21, 2009 An unusual tactic by Bank of
America helped a 69-year-old California man save his home of 40 years
from foreclosure, according to a story in todays
Wall Street Journal. Pedro Garcia and his family now have a home
that is nearly payment free.
The WSJ story by David Graham says the strategy is
also being used by others to help debt-strapped seniors locked into
exotic mortgages known as option AMRS from losing their homes.
The report says Garcia owed about $490,000 on his
home, which is currently worth about $150,000. Bank of America wrote
down a majority of the loan and then issued a reverse mortgage for most
of the rest.
A big difference in this transaction than most is
the bank paid the reverse mortgage proceeds to itself. The WSJ points
out that a reverse mortgage is a form of equity loan available to older
homeowners that generally doesn't need to be repaid until after the
homeowner dies.
So, now, Garcia lives in the home with no mortgage
payments to Bank of America.
When he dies, the house reverts to Bank of
America, and his heirs can choose to buy it back for the $85,000 plus
interest and fees. Or, if the heirs choose to walk away, the bank can
sell the house, and any proceeds above the loan amount would go to Mr.
Garcia's family, reports the WSJ.
>> Read the complete story, Fixing Troubled
Mortgages for the Elderly, in the
Wall Street Journal
Keep up with the latest news for senior citizens, baby
boomers
