Letters: Racial Income Gap and Reverse Mortgages

Listeners comment on the growing income gap between white and black families, and Washington Post real estate columnist Elizabeth Razzi provides an explainer — and a correction — on reverse mortgages.

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NEAL CONAN, host:

It's Tuesday, the day we read from your e-mails and blog comments.

The Pew Charitable Trust released a new survey last week, which showed a growing income gap between white and black families in the United States. And we asked you to tell us what's driving the disparity.

The difference is explained by an inadequate national response to the devastation of African-American communities by centuries of discrimination, wrote Bob, a listener in Tallahassee. Today, structural discrimination, not discrimination based on prejudice, is where the real damage is being done. Having established group-based inequality based on prior legally enforced discrimination, structural discrimination trades on these economic disadvantages created in the past to maintain historical inequalities in the present. Until we institute a marshal plan to finally deal with what we've done, concludes Bob, we'll be saddled with trans-generational inequality and interracial antagonism and conflict.

Another listener argued it's time to move forward and not to look back. The system is designed so you don't have to die as poor as you were born. One simply has to go to school, study hard, pay attention and save as much as one can. I'm African-American and I was born poor, but I got good grades in high school, was able to go to college. Now, I can pretty much call most of the shots in my life.

A long time ago, if you were black, people could come to your house, drag you out of it, burn your house down and hang you from a tree. That doesn't happen anymore. Don't cry and blame, get busy. That, from Chris(ph) on our blog.

We also have an update on the story that we talked about last month, when New Orleans District Attorney Eddie Jordan resigns, signing a $3.4 million discrimination suit against his office. To pay it, the assets of the DA's office could have been ceased. Instead, the news out of New Orleans today is that the city and the state of Louisiana have agreed to split most of the payment. The rest will be paid by the district attorney's office.

And finally, a correction. We talked last week about some of the alternative ways to lend and borrow money, including what's called a reverse mortgage. Several listeners wrote to tell us that our guest's explanation of what that is that you basically agreed to sell your house to the bank was wrong.

So we've called on Elizabeth Razzi, real estate columnist for the Washington Post, who's in a studio at the newspaper. Elizabeth, welcome back, thanks for helping us out.

Ms. ELIZABETH RAZZI (Real Estate columnist, Washington Post): Oh, happy to be here, Neal.

CONAN: So in a language we can all follow, if you take out a reverse mortgage, what happens?

Ms. RAZZI: It's exactly what it says. It's a reverse mortgage. You still own the house. What you're doing is borrowing against it and getting payments. Usually, you can take it several ways. It can be monthly payments, a lump sum, a line of credit or combination of those. But these payments come to you. You don't owe anything back until you leave the home permanently, whether that's for a nursing home, a family residence or if someone is deceased.

CONAN: At the end of the process, the bank does not own the house?

Ms. RAZZI: At the end of the process, when the borrower leaves the home, that's when the tab comes due. And the home is usually sold to pay off that outstanding balance owed to the lender, but the remaining equity in the house, if there is any, goes to the heirs.

CONAN: And it — from what you were saying, it's clear not just anybody can get a reverse mortgage. There are age requirements.

Ms. RAZZI: There have lot of requirements. They're very regulated. You have to be 62 years old or older to qualify for a reverse mortgage. There's also, with the HUD program, the government-approved program, there's a requirement that borrowers are counseled by HUD-approved counselors before they get involved with a reverse mortgage, because they are very complicated and there are high fees in the short run.

If you're only going to live in the home for a year or two, the high fees, which are added to the loan dollars right at the start - people don't have to actually write a check - those fees make it really not worthwhile. But if you need to improve the home so you can live in it for a long time, say, make some modifications to have a disability or if the homeowner is having trouble in retirement paying their property tax bill, that sort of thing, those are very good reasons to take a reverse mortgage. And that money can help and allow them to remain in a home for the long term.

CONAN: Over the long term - and you were going to say over the long term?

Ms. RAZZI: Over the long term, it can be a very economical or reasonably priced way to finance your living during retirement. But for a year or two, it's rather expensive way to go about it.

CONAN: Elizabeth Razzi, thanks very much for your time today.

Ms. RAZZI: You're welcome.

CONAN: Elizabeth Razzi, real estate columnist for the Washington Post and author of the "The Fearless Homebuyer: Razzi's Rules for Staying in Control of the Deal."

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