Reverse Mortgage Guide

In Kansas, the Democratic candidate for attorney general, Margaret Donnelly, says we need to do something about reverse mortgage scams and scammers.

She wants to create a scam and fraud hotline for seniors to report problems. The hotline would also allow seniors to learn about the latest schemes aimed in their direction

Donnelly, according to her website, “would direct the office to investigate how lenders market ‘reverse mortgages,’ which allow borrowers to receive monthly payments based on their home equity. The mortgages are good for seniors and others in some circumstances, Donnelly said, but there may be cases in which lenders are pressuring borrowers to purchase the loans or bundling them with unneeded products.”

“No one saw the subprime problem coming,” Donnelly said, referring to the mortgage meltdown that disrupted world financial markets beginning last year. “I think that the reverse mortgage industry as it is today is unregulated and needs to be investigated so we don’t have any future problem on our hands.”

Well, yes, true, but there are several problems here.

First, we do not have a subprime mortgage meltdown alone — otherwise why are so many million-dollar homes being foreclosed?

Second, most home loans come from national lenders and their mortgage subsidiaries, meaning that they are “regulated” by federal officials — and also meaning that state officials have no jurisdiction over national lenders and the loans they make. Federal officials did nothing to stop option ARMs, interest-only mortgages, 3/27 and 2/28 mortgages or stated-income loan applications, the central causes of today’s mortgage troubles.

Ms. Donnelly has a good idea, we certainly wish her well, but it would be better if her ideas had been adopted nationwide by federal officials in 2002, 2003 and 2004.

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This entry was posted on Tuesday, July 8th, 2008 at 8:20 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.