Fact Finder: Reverse Mortgages, one family's story
Melba Clark's Mishawaka house is maybe 800 square feet. It needs some work, but it is home.
"I love it that I can look out and see kids playing in the park in the summer time and this is really a nice neighborhood," says Clark, who bought the house with cash in the 1970s or 80s with her husband.
She's been living in her green two bedroom home for at least 30 years. Now, 89-years-old and in the last stages of congestive heart failure, her daughter, Sheryl Gerald lives with her.
"My largest concern right now is taking care of my mother. That is why I am here," says Gerald.
But Gerald is also dealing with something else: A mountain of paperwork that makes no sense.
"This is the biggest mess I have ever seen in my life," says Gerald as she sorts through a pile of paperwork.
In 1995, to pay for her husband's funeral expenses, Melba took out a reverse mortgage on her home. She got $19,000 cash. Recently, Gerald received a bill in the mail saying her mom owed $97,000 -- on a home barely worth $35,000.
"She no more knows what she signed, she doesn't know what it is, she doesn't have a clue what has been done," says Gerald.
So Gerald is left to sort it out.
The company won't give her any answers and she believes her mother was scammed.
The Better Business Bureau says there are great companies out there to work with but there are also scammers.
"We do hear of people taken advantage of," says President and CEO of the Better Business Bureau of Northern Indiana Michael Coil.
That is why the BBB and AARP recommend getting all the facts before signing the papers. Reverse mortgages can be expensive and complicated. And make sure your family and a trusted financial advisor are in the loop.
Take it from Gerald, there is no going back.
"I probably should have looked into it years ago, but when you think your parents are taking care of their own business, you just don't," says Gerald.
So, what is a reverse mortgage?
According to AARP, a reverse mortgage is a special type of loan for people over the age of 62 that allows you to borrow against the equity that you've built up in your home. You still own your home, but if you sell or die, the loan needs to be repaid or the bank can take the home. Remember, there are substantial fees and interest that go along with reverse mortgages, so make sure you can afford those.
Reverse mortgages are not for everybody. And there are cheaper alternatives. AARP recommends looking into those before turning to a reverse mortgage.