Reverse Mortgage Guide

Fallout from the recent New York Times article (”Golden Opportunities,” March 2nd) concerning reverse mortgages continues.

In a letter to the editor, published by the Times on Sunday, Kevin R. Keller — Chief Executive with the Certified Financial Planner Board of Standards — wrote the following:

“When an unscrupulous salesman combines a reverse mortgage with a deferred annuity, it makes it all too easy to mislead seniors. What may look like a sensible investment to an elderly American rarely is. Without regulation prohibiting such a combination sale, the problem will grow only worse.

“Another need for regulation is to address the inherent conflicts of interest when counselors who are supposed to be acting in the best interests of clients are compensated by the company promoting reverse mortgages. We believe that a client’s best interests are served by a financial adviser who has earned a reputable credential and adheres to an enforceable code of ethics that articulates a fiduciary responsibility.

“Seniors can and should demand transparency, accountability and honesty when choosing how to invest their life savings.

Mr. Keller has this exactly right. We continue to believe that there are no circumstances where a lender or affiliated party should sell both reverse mortgages and annuities. The opportunities for abuse are just frequent.

HUD now allows lender-paid loan counselors, a farce which devalues every reasonable standard and appearance independence which borrowers should expect. How can counselors not seem like a puppets swinging in the wind when living on lender disbursements?

“To clarify the previous message sent on 11/20/07 regarding HECM counseling,” says HUD, “prospective HECM borrowers may not pay for HECM counseling services until FHA issues guidance. Lenders may continue to pay for these services, either on a case-by-case basis or through a lump sum contribution to a HUD-approved housing counseling agency.”

Does anyone feel this is fair?

This entry was posted on Thursday, March 13th, 2008 at 5:17 pm 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.