Reverse Mortgage Loan Blog

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.

Found here.

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