North, South Memphis hit hard by reverse mortgage foreclosures

Majority African-American communities in North and South Memphis saw more than 130 foreclosures result from reverse mortgage loans in recent years, a USA TODAY project has revealed.

The project showed many reverse mortgages failed in the aftermath of the great recession, with African-Americans in urban areas being hit the hardest. Lenders foreclosed on the homes after elderly borrowers, many near the poverty line, missed a deadline or tax and insurance payments, it said.

Areas of Chicago, Baltimore and Detroit were among the hardest hit, the project found in its review of 1.3 million loan records. But Memphis, a majority African-American city, also had communities slammed by reverse mortgage foreclosures.

Consumer advocates said the findings show “unscrupulous lenders targeted lower-income, black neighborhoods and encouraged elderly homeowners to borrow money while glossing over the risks and requirements,” according to the report.

Reverse mortgages allow older people to tap into their home equity by getting a loan against it, the balance of which grows over time. The funds can provide a financial lift to those in retirement and keep them in their home, but some issues remain with the financial tool that can hurt vulnerable borrowers who aren’t fully prepared.

“A lot of people don’t know what it is they’re getting into,” said Charles Sims Jr., CEO of The Sims Financial Group in Memphis. “They may have cash flow problems, or they don’t understand reverse mortgages.”

Where did the Memphis foreclosures happen?

In Memphis, reverse mortgages that ended in foreclosure between 2013 and 2017 occurred most frequently in North and South Memphis.

The 38109 ZIP code, which runs along the Tennessee-Arkansas border and encompasses some of Whitehaven, saw 6.35 foreclosures per 1,000 senior residents. That’s 54 total for the 95% black community with a median household income of less than 30,000, according to Census data.

The 38107 ZIP code, home to New Chicago, had 5.87 foreclosures per 1,000 seniors. The community is 80% African American with a median household income of $28,281.

The 38114 ZIP code, containing Orange Mound and other neighborhoods south of Cooper-Young, had 5.12 foreclosures per 1,000 seniors. In that ZIP code, the median household income is a hair above $25,000 and 91% of its residents are African American.

The 38106 ZIP code in South Memphis and the 38108 ZIP code in North Memphis also saw high amounts of foreclosures during this time, more than a dozen each, that resulted from reverse mortgages.

Memphis’ foreclosures back up USA TODAY’s findings that reverse mortgages end in foreclosure six times more often in predominately black neighborhoods than those with an 80% white population. Black neighborhoods still fare worse even when comparing only poorer areas, per the analysis.

The heavy loss of manufacturing jobs in Memphis over the years led to many looking for other sources of income, Sims said, along with low-income households making up a sizable chunk of the city.

For the elderly, a reverse mortgage may seem like an easy path to more income, but those who are looking to borrow should ultimately have the ability to pay for what they’re borrowing, Sims added.

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Max Garland covers FedEx, logistics and health care for The Commercial Appeal. Reach him at max.garland@commercialappeal.com or 901-529-2651 and on Twitter @MaxGarlandTypes.

USA TODAY Investigations: Help us investigate reverse mortgage foreclosures

USA TODAY Investigations: Help us investigate reverse mortgage foreclosures