Reverse Mortgage Abuse on the Rise

[Robbien]

Seniors are increasingly becoming targets of aggressive marketers who are selling reverse mortgages that many customers don't need or understand, according to members of Congress, government regulators and consumer advocates. Some promoters are accused of persuading seniors to use loan proceeds to buy annuities and other high-commission products.

. . .

As the number of loans has grown, angry homeowners are filing lawsuits against lenders, alleging predatory practices. Meanwhile, the Florida Attorney General and the Financial Industry Regulatory Authority, which oversees securities firms, issued alerts this year to warn about the risks of reverse mortgages

. . .

Many lenders are aggressively recruiting loan officers with promises of lucrative sales. "The Easiest Sale You've Ever Made!" advises one mortgage company that conducts sales workshops for brokers. It notes that six sales a month could generate "up to $44,833 in monthly commissions."

In early May, brokers and lenders were to attend a conference in Las Vegas to learn how to sell the loans, including tips on "overcoming objections" by prospective borrowers.

. . .

Some retirees are using these loans to take fancy trips, start small businesses and pay for their grandchildren's college. But upfront fees are substantial. Financial planners and consumer experts suggest that seniors should consider a reverse mortgage only when they need cash for essential expenses, such as home repairs and medications. "A reverse mortgage shouldn't be seen as a cost-free way to enhance your lifestyle in retirement," says John Gannon, senior vice-president at FINRA. "It's an expensive option, and people need to realize they're reducing the value of their home."

http://www.kiplinger.com/printstory.php?pid=14302

Since mortgage brokers and banks are so very eager to sell this product because of the huge profit, it is wise to keep in mind that their huge profit come from seniors' pockets.

A reverse mortgage is a very expensive loan. A home equity loan (as expensive as that is) is much cheaper than a reverse mortgage.

[Prefer]

1. Why leave anything for the survivors?

it's all about me!

[Donnachaidh]

3. but that's not how it's presented to the elderly people

They are pressed to do it to keep from having to ask their CHILDREN for help with bills. THAT is a much scarier situation for the elderly.

I've seen far too many *children* who are itching to get at their parent's homes - to sell them to pay the bills THEY over ran. Personally, the parents should do what they have to do to survive in that situation -- the kids be damned.

[Truth4Justice]

13. Its predatory what some people do to take advantage of the elderly who trust others too much, IMHO.

[Truth4Justice]

14. My parents didnt prepare for illness and death so we were stuck with more debt. Works both ways.

[Donnachaidh]

2. those ads with Pat Boone and Robert Wagner -- elderly think they are SAFE

from profiteers -- they are NOT safe. And both those actors need to stop making those commercials.

It doesn't surprise me - It's just the bank's way of getting their hooks into the homes that have full equity. These programs should be OUTLAWED. :grr:

[Robbien]

5. If PayDay Loan Shops are not outlawed

but in fact encouraged and protected by this Admin, what chance is there to have these reverse mortgage sharks outlawed?

We are living in a very scary world these days.

[Truth4Justice]

12. Our state dept of rehab closed and another payday loan co moved in. Oy vey!

[rucky]

4. It's not for everybody, but it has its advantages.

If someone has built equity in their home for the purpose of cashing out when they retire, then they can do that and still live in their home. The fees are capped at 2% on the FHA loan (HECM), same as most mortgages. Equity loans & lines are much more than that.

[Robbien]

Please read the article. This market is full of corruption and fraud

and they are even giving seminars on how to pick the bones of seniors.

Only those with blinders on believe there is any good in this market.

[rucky]

7. Please study the HECM product.

There's alot of bad products out there, and cockroaches to sell them, but there is some inherent good in the concept and with proper controls.

[Robbien]

8. There are no controls. The present rampant fraud in the subprime market

proves that.

And the seminars for new reverse mortgage brokers are establishing a whole new gang of greedy vultures.

A senior would have to be very very very lucky to find an honest broker amongst all the thieves in today's market.

[Xithras]

6. A straight HELOC is usually a better idea.

Selling the house and just pocketing the proceeds are an even better idea. My grandmother sold her large and fully paid off home for several hundred thousand dollars in profit. With her investment advisors help, she bought a smaller second house and rolled the remainder into a combination of bonds and income annuities. She lived very well on those proceeds for the better part of a decade until she passed away as well. When she passed, her investments, annuities, and new home all had cash value that could be left to her heirs.

If she had gone the reverse mortgage route, all of the wealth she had gained over a lifetime would have been squandered, and nothing would have been left when she passed. She probably woudn't have had as much money each month either (between the annuities and bonds, she was bringing in about $30k a year, which was great in the early 1990's and is still very good income for a retired person today...especially a retired person with no rent or mortgage to deal with).

[wryter2000]

9. I've been thinking of a reverse mortgage

Let me state right off that I planned to use the loan person who did my refinance a few years ago. She was excellent.

My situation...I won't have all that much equity in my home as I will have been paying on it for about 8 years. All I'm hoping for is to pay off my mortgage and live in my house without payments for the rest of my life. Right now, I have to keep working at a job I HATE to make the payments. My only hope of retiring is to live in the house for free while collecting Social Security and my company pension.

I have no children or anyone who needs to inherit anything from me.

Yes, I could sell the house and find something cheaper, but the idea of moving makes me want to curl into a ball and whimper. I don't want to spend months and deal with selling/buying/moving. As I said, no one needs anything from me when I die and I'll be darned if I'll put myself through hell so someone can.

[Robbien]

10. Think about it. Does that make sense?

You have almost no equity, but you will be able to take out a large enough reverse mortgage equity loan to pay off the remaining mortgage balance then live in the house cost free for the next decade or so. Something is not right here.

I would have a third party (say an attorney) take a look at the papers before you lock it in.

[wryter2000]

11. I think I'll have enough equity to pay off the mortgage

It'll be considerably more than none. If it doesn't pay off the mortgage there's no point to even try a reverse mortgage. All I'm saying is they won't be getting huge amounts of money in equity from me.

Honestly, I don't see selling the house and moving as an option. I would have to do absolutely all of that myself without help. Life is too short. The only other option is working until I'm way old to get enough SS and pension to make the payments.

[KT2000]

15. More ads for this on tv

they can't think of enough ways to clean out the citizens.