Robert Bennett is certainly correct about the Internet being "a very valuable thing when it's used right." The same is true of the type of financial transaction that landed Bennett in trouble, so that he needed help from an Internet-based fundraising drive. But that transaction has to be approached carefully.
In 2008, the retired Naval Academy cook and his wife took out a reverse mortgage on their home on Drew Street. A reverse mortgage -- a type of transaction relentlessly promoted on TV these days by assorted older celebrities -- is essentially a way for those 62 and older who own homes outright to convert part of their equity into cash. Given that so many baby boomers lack adequate retirement savings, many will be turning to the equity in their homes; the National Reverse Mortgage Lenders Association estimates this resource comes to more than $3.8 trillion for homeowners 62 and older.
The money can be paid out as a lump sum, a regular monthly advance or a credit line. The balance of the loan doesn't have to be paid off until borrowers die, sell the property or permanently move out. But homeowners can be deemed in default and can lose their homes if they can't keep up on insurance and property taxes.
When Bennett's wife died, he was told the loan had been taken out in her name only and he would have to move out. That problem isn't unique, judging by complaints the federal Consumer Financial Protection Bureau compiled in a report it released in February. Bennett won a court case to stay in the house but didn't pay property taxes during the litigation and, according to records, wasn't covered by homeowner's insurance for a year.
So, as it turned out, he needed $13,000 to keep his home. After Bronwyn Belling, an Annapolis resident who used to work for the AARP, started the GoFundMe campaign, more than 150 people donated the amount in just six days.
We hope this means a happy ending for Bennett. But it should tell other older people to be careful about signing up for reverse mortgages. Like all mortgages, these are complicated transactions, with a lot of moving parts. They should never be undertaken as a result of high-pressure salesmanship. The county Department of Aging Disabilities strongly recommends getting independent advice before seeing someone who is selling reverse mortgages; counselors approved by the U.S. Department of Housing and Urban Development can be found online or by calling 800-569-4287.
Done properly, a reverse mortgage can help people of modest means meet their expenses and age in place. But -- as with everything else -- consumers should be wary of glib assurances that there are no catches and no possible pitfalls.