Brenda Holder, of Narragansett, is at the home of her parents, Louis J. and Irene D’Iorio, who passed away this year. Her father had taken out a reverse mortgage, and the bank is now ready to foreclose on the property.

The Providence Journal / Frieda Squires

JOHNSTON — When their father, Louis J. D’Iorio, died on Jan. 8 at the age of 94, Brenda Holder and Linda DeCiccio knew they would have to sell his house to pay off the reverse mortgage on the property.

Before they put the house on the market in March, they spent about $20,000 to paint the interior and make improvements that they thought would help it sell.

“We thought we were going to sell it right away,” DeCiccio said.

But more than eight months later, the house has not sold, and Bank of America has threatened to foreclose on Oct. 7.

A few people have expressed interest in buying the property at the asking price, which is now $339,000, but “nobody can get a mortgage,” Holder said.

The dramatic 1961 contemporary at 2 Valley View Drive was the first house ever designed by their uncle, Rhode Island School of Design-trained architect Americo Mallozzi.

The house was a source of pride to their father, an Army veteran and engineer, and their mother, Irene D’Iorio, who designed hats before she became a wife and mother of four. Irene D’Iorio suffered from Alzheimer’s disease, and she passed away in April.

The couple had saved for their dream house for 20 years while living in a third-floor apartment in Providence, according to Holder.

Holder said she has written to a number of government agencies and politicians in her effort to prevent a foreclosure auction because her father would have been “devastated” by the “disgrace of a foreclosure.” Holder said Sen. Jack Reed’s office “was the only one” who responded to her letter-writing campaign.

“This shouldn’t be happening to people,” said Holder, who noted that thousands of people continue to lose their homes to foreclosure as the government bails out companies that helped make the foreclosure crisis possible.

As early as January, the sisters knew the pressure was on: DeCiccio had received a letter from Bank of America dated Jan. 24. It began: “We would like to extend our condolences on the passing of Louis J. D’Iorio. Please forward a copy of the death certificate, if you have not already done so…”

In the second paragraph, DeCiccio was informed that “the loan is due and payable” and that “Bank of America can initiate foreclosure proceedings 30 days from the date of this letter.”

But the letter added that “if the estate is actively trying to satisfy the debt the initial repayment timeline will be extended six months from the date of the mortgagor’s passing.”

Six months would have been July 8; by that time, Holder was trying to sell the house on her own. Listing the house with a real estate agent hadn’t worked. Having the house featured as a House of the Week in The Journal on July 5 also hasn’t worked, though more than 100 people attended open houses held that weekend, Holder said.

Holder said she didn’t consider the only offer that was made: $220,000, well below both the asking price at the time ($349,900) the assessed value ($326,100) and the outstanding mortgage on the property (about $281,000).

The sisters said they are continuing to pay the property taxes, homeowner’s insurance and general upkeep on the house during this time. Family members are living at the house temporarily to “keep it safe.”

Because the reverse mortgage was HUD-insured, the estate and D’Iorio’s heirs would not be liable should the house sell for less than the outstanding loan balance, according to Kathleen Paniccia, director of Rhode Island Housing’s home ownership division.

In recent years, with the graying of the baby boom generation, reverse mortgages have become increasingly popular in the U.S. These loan products are expensive — closing costs are often hefty and the interest rates are usually variable. But they can help an elderly homeowner who is house-rich but cash-poor stay in his or her house and get access to money that doesn’t have to be repaid until the owner sells the house or dies.

In Louis J. D’Iorio’s case, he first took out a reverse mortgage in the late 1990s, then refinanced and borrowed more money just a few months before he died.

Holder estimated that her father received a total of $196,930 in loans, for which $20,399 in closing costs and other fees were charged, and $72,670 in interest accumulated, as of Aug. 1.

For every month the house does not sell, an extra $900 to $1,500 in (adjustable-rate) interest and fees is added to the loan balance, Holder and DeCiccio said.

Holder said she believes the loan charges and fees are predatory. She recently wrote to Michael J. Dziok, of the Department of Housing and Urban Development in Providence, about her family’s situation.

“For this to happen to my dad’s home, who was a major in WWII in the Army Corps of Engineers, is a total disgrace, not only because he is a veteran but because this is happening to elderly families across the nation. I feel that the reverse mortgage is a predatory loan and some adjustments must be made.”

DeCiccio has written to Bank of America seeking a moratorium on accruing interest charges and a rebate of some of the closing costs to give the family more time to sell the house at a reasonable price.

“In reviewing the papers after his death, we discovered that my dad had paid nearly $20,000 in closing costs on the two mortgages plus $1,800 in fees to close out the first in order to process the second…,” she wrote in a Sept. 18 letter to Charles Jones, of Bank of America’s reverse mortgage servicing office in Seattle. “I am certain you would prefer that we sell rather than have the property go into foreclosure. If foreclosed, this beautiful home would then be vacant, the gardens overgrown, and neglect could lead to vandalism. Then what would be the value?”

“I am offering an alternative: My family and I will continue to support the upkeep of this home, pay the taxes, insurance and expenses so that it will be in top condition for sale. In return, I would ask that you try in some way to reduce expenses from your end. I suggest a moratorium on the monthly interest, credit for some of the closing costs and servicing fees or some reduction in the amount owed.”

DeCiccio has not received a response from the bank, but Dave Bradley, a spokesman for Bank of America, said the bank may opt to give the family more time to sell the house. Determinations are usually made based on local market conditions, he said. Bradley said he could not comment on the family’s request for a moratorium on interest and fees or a rebate on closing costs.

“We paid enough on this house,” Holder said. “My father paid enough. I’m doing what my father would want to do.” She said her message to the bank is simple. “Give us a year to sell this house, and leave us alone.”

Holder wants to connect with other individuals who may be in the same situation with reverse mortgages taken out by their elderly parents. For more information, contact Holder at BRENH1010@cox.net

cdunn@projo.com