Bank mailings target seniors

AARP holds statewide forums to educate senior citizens on reverse mortgages

Posted: Friday, November 21, 2003

When Mary Lou Knickerbocker, 83, of Juneau, lost her monthly $250 Longevity Bonus payments in August, she, like many older Alaskans, began looking for a way to supplement her income.

In early October, Wells Fargo bank mailed her and about 18,000 other Alaskans who lost the bonuses a flier recommending she consider a reverse mortgage on her home.

Wells Fargo obtained the list of Longevity Bonus recipients from the state, according to Debora Blume, a spokeswoman for Wells Fargo.

The mailing campaign prompted AARP, a seniors advocacy group, to hold forums in Anchorage, Fairbanks and Juneau to educate seniors about reverse mortgages.

About 20 older Alaskans attended the forum Wednesday at Centennial Hall.

Blume said reverse mortgages aren't for everyone and a number of safeguards are in place to protect seniors.

"We have nothing against reverse mortgages," said Ann Secrest, an AARP official. "We just want (seniors) to be aware of what they're signing."

Reverse mortgages allow senior home owners to borrow money on the value of their homes. Lenders do not have to be repaid until the owner dies, sells the home or permanently moves.

Cash received from a reverse mortgage can be paid in a lump sum, monthly advances, a line of credit or through a combination of the three options.

The amount that can be borrowed and the length of the loan depends on the age of the home owner and how much the home is worth. But as the home owner's debt grows larger, the equity of the home - the amount of cash left after selling a home and paying off loans - grows smaller.

To be eligible for reverse mortgage loans, borrowers must be 62 or older and own their home.

Knickerbocker, who has lived in her home since 1977, said she consulted a family friend about reverse mortgages and decided it was not the right move for her.

"The thing that jumps out at me is how expensive it would be if I took it out for two or three years," Knickerbocker said. "Probably I can figure out some other alternative. I think I have the sense to get good advice, but there are a lot of 80-, 90-year-olds who don't."

Blume said the program requires mandatory counseling from a U.S. Housing and Urban Development-approved nonprofit or public agency. She also noted the loan cannot exceed the value of one's home, and seniors do not have to give up the title of the home when entering into a reverse mortgage.

"As the leading originator of reverse mortgages, Wells Fargo Home Mortgage is in a unique position to serve seniors interested in receiving info about the reverse mortgage program," Blume said.

She said it can cost between $7,000 and $10,000 to enter into a reverse mortgage.

"That can be a big consideration for seniors," she said.

Secrest said since longevity bonuses ended this summer, AARP has been flooded with calls from seniors trying to figure out how to make up for the loss. She said reverse mortgages are a relatively new industry and many people don't understand the risks involved.

Jan Jones, a housing counselor with Anchorage Neighborhood Housing Services Inc., advised forum attendees to seek counseling from a truly independent source before considering a reverse mortgage. "If you have someone pushing you into a program, back off and wait," she said.

Jones said short-term reverse mortgages can be the most expensive. She said three companies - Wells Fargo, Seattle Mortgage Co. and Financial Freedom - offer reverse mortgages in Alaska.

Jones is offering free counseling sessions for those considering a reverse mortgage. The session takes about one hour and can be done in person or by phone, she said.

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