Reverse Mortgage Loan Blog

As a reverse mortgage broker, I feel compelled to comment on some of the points made in “Congress looks into reverse mortgages as abuses begin to occur,” (Feb. 18, Business ). Demographics suggest that the reverse mortgage will have enormous growth over the next decade as Baby Boomers retire, so it is crucial that potential borrowers understand exactly how these loans work and how to protect themselves from unscrupulous brokers.

Getting an education, discussing the loan with your family, friends, financial adviser, accountant, etc., is strongly recommended by a good broker. The HUD-mandated counseling is another consumer safeguard that should have “red-flagged” Carol Anthony’s mother and dissuaded her from purchasing a deferred annuity.

A good broker also will provide a written estimate of the proceeds available to the prospective borrower and an estimate of all the fees, costs and taxes. The final estimate is provided prior to the actual signing of the closing documents. All costs associated with an FHA-insured reverse mortgage are limited by the Department of Housing and Urban Development, no exceptions allowed.

The National Reverse Mortgage Lenders Association, HUD, and AARP have worked together on the FHA modernization bill currently before Congress. If passed, it would lower costs to consumers, expand eligibility and increase safeguards.

There is nothing wrong with the reverse mortgage itself. For many seniors, it is truly a lifesaver and a way for them to stay in their homes and retain financial independence. A good broker has a fiduciary and moral responsibility to see that the proceeds received from the reverse mortgage are used as intended, and not speculated or “conned” away.

I applaud Congress for protecting seniors and for AARP, HUD, and NRMLA insisting on high ethical standards for loan originators and lenders. This could be the one of the most successful government programs ever, and it is important that the industry works closely with the federal government to keep the “rogue” broker out of home equity.

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