Minnesota AG To Reverse Borrowers: Be Careful Out There

Writing in the St. Paul Pioneer Press, Lori Swanson, Minnesota’s attorney general, said on Sunday that “in 2006 President Bush signed the Deficit Reduction Act. One major change in the law was to limit the equity a Medicaid recipient can have in his or her homestead. At the urging of the financial industry, Section 6014 of the law actually encourages senior citizens to take out reverse mortgages, which in many cases are costly and unnecessary.”

Swanson also said “with an estimated $4.3 trillion in home equity held by Americans age 62 and older, this is an attractive market niche for lenders.

“The products are suitable for some borrowers, but national senior advocacy groups have reported an increase in seniors who are pitched reverse mortgages that are too expensive or not suitable.

“They also report seniors being duped into taking out a reverse mortgage merely to put the proceeds into an investment like a long-term deferred annuity, where the cost of the mortgage outweighs any investment gains on the new investment. The winner in those cases: the agent, the mortgage company and the insurance company. The loser: the senior citizen.”

Swanson says that the FBI has now noticed a “a spike in reverse mortgage fraud, both as to excessive fees and abusive marketing practices.”

As we say, one solution to the problem of inappropriate or plain wrong reverse mortgages is to get proper counseling. To us this means prospective reverse mortgage borrowers should sit down with an attorney who specializes in elder law before signing any paperwork.

For the full story, please see: Suitable for some, a bad deal for others — borrower, beware, April 27, 2008.

This entry was posted on Monday, April 28th, 2008 at 12:37 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.