There's a new twist to reverse mortgages.

They're being used more and more by senior citizens for escaping  high-interest loans in order to keep their homes.

Reverse mortgages are payments made to the borrower rather than the borrower making payments to the bank.  That sounds good on the surface but such mortgages can get very complicated and generally have very high fees.  If you take one out, it will be difficult to leave your house to your heirs.

It was surprising for me to learn how many seniors still owe on their homes and have not fully paid off their mortgages.  Numbers have skyrocketed since 1989  to 22 percent.

So what should a senior citizen over 60 do if faced with foreclosure?

Write a letter to the bank's  loss-mitigation department explaining you will be offering to trade your home's built up equity in a reverse mortgage  in exchange for being allowed to stay in your home.

That will work with a lot of lenders now for several reasons. 

They don't want to lose more on your house.  If the house should fall into foreclosure it could cost the lender more than if you kept it.

Also, some lenders have a lot of explaining to do on why they allowed many sub-prime loans to go through in the first place.

Housing attorneys are discovering many lenders will take around 60 cents on the dollar.

Housing Attorney William J. Brennan Jr. tells the Wall Street Journal,  "Lenders have been making loans regardless of the borrowers' ability to pay, and there needs to be a penalty for that."

Fair enough.   The old advice when you have your back against the wall, compromise, may hold a lot of wisdom after all for everyone concerned.

Read  the Wall Street Journal's article Reverse Mortgages: A Way Out of a Bind for Older Homeowners

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