Reverse Mortgage Loan Blog

Legislation would have protected seniors.

As a consumer organization representing more than 700,000 Minnesotans age 50 and older, AARP would like to respond to reverse mortgage broker Gail Wempner’s July 13 Business Forum column, “Seniors need reverse-mortgage option,” about Gov. Tim Pawlenty’s veto of a bill to protect consumers of reverse mortgages.

Unfortunately, reverse-mortgage fraud happens — even in Minnesota. While there are many fine lenders, there are also bad actors who prey upon older homeowners with attractive amounts of home equity. Consumers of reverse mortgages deserve protection from fraudulent tactics that could steal their home equity and destroy their financial well being.

AARP supported this legislation as a common-sense way to protect consumers of reverse mortgages, while at the same time ensuring that those who truly need these products can get them.

Home equity is the biggest part of life savings for most older Minnesotans. A reverse mortgage is a very serious transaction that requires education, time and thought. A wrong decision could have dire consequences.

We believe that these products should be used as a last resort for most consumers. However, we know that they can be a useful safety net for many Minnesotans who have no other choice and want to remain living independently. AARP wants to make sure these products are on the market — and that they are safe, reliable and easily understood by consumers.

AARP supported this legislation for many reasons:

First, the bill prohibited cross-selling of other financial products during a reverse mortgage transaction. Too often, the home equity of borrowers is depleted because they are offered inappropriate financial products, such as annuities or long-term care insurance.

Consumers should be wary of anyone who tries to sell them something that can only be paid for with a reverse mortgage. The legislation vetoed by the governor would help prevent this.

Additionally, the bill would have required mandatory counseling for those seeking a reverse mortgage so that consumers know the pros and cons of entering into a reverse mortgage and understand the high upfront costs. It also included a “suitability” clause to ensure that reverse mortgages are sold only to people who need them.

And, the legislation would have expanded the timeframe in which consumers can reconsider and rescind their loan.

AARP is disappointed that Gov. Pawlenty vetoed this bill that would help protect homeowners seeking reverse mortgages.

We hope that the industry and lawmakers are willing to come to the table to protect older homeowners and we are willing to work with all parties to find a reasonable solution that protects Minnesota’s consumers.

Michele Kimball is state director of AARP.

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