As reverse mortgages end, heirs are left with heartache

latoya gatewood
Latoya Gatewood-Young was surprised to learn there were five people on the title to her grandfather’s house, which has been in her family for a century. JASPER COLT, USA TODAY

After a death, heirs who want to pay off reverse mortgages to hold onto a family home can be stymied by a seemingly endless cycle of problems.

Nick Penzenstadler, USA TODAY

Updated 9:32 a.m. PST Dec. 19, 2019

When Gatewood-Young’s grandfather died in 2016, the family was surprised to discover that his rural Maryland home on 10 acres had a reverse mortgage lien against it. He had drawn down about $150,000 with his reverse mortgage — a sum that had to be paid back for the property to be transferred to his family.

“The executor of his estate was my aunt and (she) explained that Wells Fargo had already communicated that if we did nothing it would go into foreclosure,” Gatewood-Young said. “I said, ‘Absolutely not.’”

Gatewood-Young, the only heir interested in the property, got herself qualified for a traditional home loan and started the purchase process.

That’s when 200 pages of title history arrived showing that her grandfather only held a one-fifth ownership stake in the property. It was unclear who owned the rest.

Ever since, the lender has been referencing an impending foreclosure, due to the death and non-repayment of the reverse mortgage.

The estate of Robert Young sits unoccupied while his granddaughter, Latoya Gatewood-Young, tries to keep it from foreclosure.

The estate of Robert Young sits unoccupied while his granddaughter, Latoya Gatewood-Young, tries to keep it from foreclosure.

Even after a court fight to resolve the title dispute, several expired appraisals, costly upkeep of the property and complaints to a string of lenders, servicers, regulators and even her congressman, Gatewood-Young still has not been able to buy the family home. The latest dispute with Champion Mortgage: a final purchase price that has jumped more than 30%.

“This property means the world to me and you can see in the documents there is no way my grandparents should have qualified for a reverse mortgage,” Gatewood-Young said. “I call it predatory lending.”

This property means the world to me and you can see in the documents there is no way my grandparents should have qualified for a reverse mortgage. I call it predatory lending.

Gatewood-Young took her case to the Consumer Financial Protection Bureau as well as her congressman, Rep. Andy Harris, who set off a Congressional inquiry at HUD, alleging shoddy loan origination and servicing.

In a January 2017 response to her complaint, Wells Fargo and the new servicer, Champion Mortgage, denied any wrongdoing and said a foreclosure had been paused while the title issues were sorted out by their attorneys. Gatewood-Young continued fighting in court, finally clearing the title this fall. All that remained was the purchase price dispute.

After USA TODAY contacted Wells Fargo inquiring about Gatewood-Young’s case in December, the bank changed course, saying it will write off more than $30,000 in costs, allowing her to pay off the loan at its 2016 balance.

“She’s been working diligently all along and it was a complicated issue,” said bank spokesman Tom Goyda. “Once we were made aware of the specifics, we were able to get it resolved.”

When Grace Bonnicelli thinks of reverse mortgages, she remembers a particularly troubling knock on her mother’s door in 2018. A man asked her sister, “Is this house for sale?”

She quickly told him no, he apologized, but mentioned that he had seen the posting in the newspaper, Bonnicelli recalled. 

The reality was even worse: not only was the home listed for sale, it had been sold back to the bank at a sheriff’s sale the previous day.

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Bonnicelli, of New Jersey, says her mother had had a series of mini strokes, which impaired her memory. She missed tax and insurance payments on the family home, on which she had taken out a reverse mortgage in 2009.

Those missed payments had pushed the loan into default and led the servicer to demand the full $200,000 owed.

The knock at the door was the first Bonnicelli knew of the problem and she, along with her family, sought to fix it. Then came the eviction notice.

There was no negotiation; they were soulless, heartless.

“There was no negotiation; they were soulless, heartless,” Bonnicelli said of the loan’s servicer, which also was Champion Mortgage.

Champion did not respond to requests for comment from USA TODAY.

The family hired an auctioneer to sell the family’s belongings to help pay for her then-86-year-old mother’s long-term care facility. They fought for a two-month delay to allow time for the sale and move.

A Champion attorney argued against the delay, saying taxes were late dating back to 2012, which could have triggered a foreclosure years earlier.

“We object to any delay in the removal of the Defendant, the former owner of the property,” the attorney wrote. “She should have been aware that her time in the property was coming to an end as early as December 2012, yet did not take steps to locate a new place to live until August 2018, after the property was already sold at sheriff’s sale.”

A judge disagreed and granted more time for the move, through last January.

In April, the family spotted the home on a “real estate-owned” auction site and was able to buy it back, renovate it, then sell it again over the summer. 

“We did it partially to spite them,” Bonnicelli said.

Daughter worried family home will be sold from under her

As an attorney with the Legal Aid Society of San Diego, Alysson Snow has handled a lot of complex property disputes. But she only has one word to describe a case she’s currently handling: Crazy.

Starting in 1996, her client, Joanne Diener, lived with her father in his Oceanside home. He passed away six months ago. Within 24 hours, the lender was calling Diener about the reverse mortgage and the potential for it to go into default. 

She sent in a form indicating she wanted to purchase the property and got approved for traditional financing, only to receive a notice of default anyway. That was just the beginning.

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The loan servicer assumed the home was empty, posting a neon green sticker saying: “this property was found VACANT” on her door, triggering a chain of events usually taken to secure abandoned properties.

“Four days later she came home to a notice of abandonment — in the same home she was living in and receiving letters from the lender,” Snow said. “The next day, a notice of trustee sale was posted for the home and her water was turned off for purported weatherization. It was 90 degrees.”

Snow is filing legal documents with the San Diego County court officials trying to slow down a foreclosure, which can happen quickly under California law. Currently, the four-bedroom house is scheduled to be sold at auction the end of this month. Anyone can view it today on sites like Zillow, where it is listed as a “pre-foreclosure.”

Snow said the lender pushed the home toward foreclosure before Diener had a chance to indicate her wishes and prove she had the financing.

“It’s crazy what they’re trying to do to get her out of the house,” Snow said.

A representative for the lender, Reverse Mortgage Funding, said she could not comment on the case, citing privacy concerns.

Diener says she felt like the lender was trying to steal the home she lived in for 23 years.

“I felt robbed,” she said. “I would describe it as a horror show that would not end.”

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