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Reverse Mortgage News for Seniors
Reverse Mortgages Coming Under Media Fire for
Actions by Some Lenders
SeniorJournal.com columnist and New York Times cite
examples
By Tucker Sutherland, editor
 March 3, 2008 – Reverse Mortgages, designed to help
older people use the equity in their homes to finance their retirement,
have enjoyed mostly praise in these first few years of the program
designed by the government and featuring a government guarantee. Now,
however, senior citizens and financial experts are beginning to see
serious problems – at least with how some lenders are handling the
loans.
The biggest bomb may have been dropped on Sunday by
the New York Times with an article entitled, “Tapping into Homes Can be
Pitfall for the Elderly.”
Charles Duhigg, writing for the Times, says, “As
the United States has become an older nation, reverse mortgages have
grown into a $20-billion-a-year industry, with elderly homeowners taking
out more than 132,000 such loans in 2007, an increase of more than 270
percent from two years earlier. In surveys, many borrowers say reverse
mortgages have improved their lives and provided money they needed for
retirement.
“But hundreds of people who have sought reverse
mortgages — in lawsuits, surveys and conversations with elder-care
advocates — have complained about high-pressure or unethical sales
tactics they say steered them toward loans with very high fees. Some say
they were tricked into putting proceeds of their loans into unprofitable
investments, while sales agents pocketed rich commissions.”
His article explores the stories of what happened
to several senior citizens that used reverse mortgages.
Even the financial columnist for SeniorJournal.com,
Jeffrey D. Voudrie, began to raise questions in his column – Guarding
Wealth for Senior Citizens – with an article headlined, “Should Senior
Citizens Use Reverse Mortgages? Columnist Has An Answer.”
Voudrie wrote in the column published February 22,
“It all sounds so wonderful: easy access to your home’s equity, no
monthly payments, and all without having to sell your house or move.
You can have a guaranteed income for the rest of your life! I feel that
the sales pitches for these products do a disservice to seniors and, in
some cases, can do irreparable damage.”
He said, “A reverse mortgage is probably the most
expensive loan available today. The up-front fees can be astronomical.”
Voudrie, like Duhigg of the Times, has some real
life examples: “A friend of mine asked me to check out a reverse
mortgage being pitched to his elderly parents. The proposal given to
them by the bank showed that in order to access $33,000 in equity, they
would be charged almost $18,000 in fees! That’s over 50%.
His straight-shooting column walks through the
problems and concluded with, “A reverse mortgage may be right in special
situations, but it’s anything but free money.”
That column generated a lot of readership and
discussion. He followed it up the next week with, “Pulling Back the
Curtain on Why Reverse Mortgages are So Heavily Marketed.”
This February 28 column ‘did pull back the curtain’
on the reasons reverse mortgages have become so heavily marketed. He
also wrote more about what senior citizens need to do as a consumer to
protect themselves.
“Don’t blindly fall for the reverse mortgage sales
pitch. Explore all the options and make sure you’re making the choice
that is best for you. I also suggest you get your children involved as
well. You could just sell the house and move in with them…just kidding!”
he said in conclusion.
Clearly, many senior citizens have been satisfied
with their reverse mortgage, and many have not. It can only be
beneficial for older Americans to read these articles (links below) to
know more about how the program works and how some may try to take
advantage of you.
At the end of last year, reverse mortgages were
also taking a beating in Washington, including in the Senate Special
Committee on Aging. See links to these reports in the box above.
>>
Tapping Into Homes Can Be Pitfall for the Elderly (New York Times,
3-02-2008)
>>
Questions to Ask Before Taking a Reverse Mortgage (New York Times,
3-02-2008)
>>
Should Senior
Citizens Use Reverse Mortgages? Columnist Has An Answer
(Guarding Wealth for Seniors, Voudrie, Feb.
22, 2008)
>>
Pulling Back the Curtain on Why Reverse Mortgages
are So Heavily Marketed (Guarding Wealth for Seniors, Voudrie, Feb.
28, 2008)
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