Orange County California

Trust Attorneys


When creating an estate or financial plan, elderly clients should be wary before taking on the increasingly popular reverse mortgage. A new report highlights the dangers that stem from these loans and the substantial financial consequences that could result. The report shows that some reverse mortgages have base interest rates as high as 9.95%, with a 50% share for the lender of increases in value of the house after it is sold. On top of all that, some loans impose a 2% “maturity fee,” as well as a $33,000 mandatory purchase of an annuity that is added to the principal balance of the loan. The annuity also incurs compounding interest.

One woman, Sarah Havemeyer, is currently embroiled in a legal battle with a California bank over her late mother’s reverse mortgage. The mortgage was taken out in 1997. Havemeyer estimates that the bank, OneWest, could be entitled to between $1.5 million and $1.6 million under the terms of the loan. Alarmingly, Havemeyer’s mother only received $272,911.51 from the mortgage between 1997 and her death in 2010. As a result, the estate and its beneficiaries will take a devastating financial loss.

Reverse mortgages are sometimes used by borrowers as part of an overall estate or financial plan in order to provide liquidity. A reverse mortgage places a lien against a senior’s home. In exchange, the bank receives periodic or lump sum payments. The full amount of the loan is not due until the borrower either dies, moves, or sells the home.

Havemeyer, as executor of her mother’s estate plan, has been involved in estate litigation with the bank for more than two years. She alleges that the terms of the loan are “unconscionable and usurious.” This is not the first time a reverse mortgage has been challenged in court. A series of lawsuits have been fought in California over the terms of these loans, citing “financial abuse of the elderly.”

To learn more about this and other issues to carefully consider when creating an estate plan, contact the experienced Anaheim trust attorneys at the Law Office of James F. Roberts and Associates, APC, today. Call our office at (714) 282-7488 for a consultation.

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