Reverse Mortgage Guide

Kiplinger is telling folks that reverse mortgages are new, improved and worth a second look:

“Retirees concerned about their decimated savings should take a second look at reverse mortgages,” says the magazine. “Beginning November 1, 2008, homeowners everywhere may borrow up to $417,000. Previously, the Home Equity Conversion Mortgage program assigned various lending limits, ranging from $200,160 in rural areas to $362,790 in the most expensive housing markets. Existing reverse-mortgage borrowers may be able to refinance their loans to take advantage of the higher lending limit. Plus, the new rules cap the origination fee, previously set at 2% of the loan value, at $6,000.”

And, says Kiplinger, “retirees will be able to use a reverse mortgage to buy a new home starting in 2009.

This is all good stuff and entirely correct, That said, the need for consumer vigilance remains:

“Reverse mortgages also have a dark side,” says the magazine. “In recent years, some unscrupulous lenders have pressured elderly borrowers into using their newfound cash to buy annuities and other financial products that imposed high fees and limited access to their money. The new rules prohibit lenders from requiring reverse-mortgage borrowers to purchase additional products or services as part of the loan agreement.”

It would be great to see a publication as well regarded as Kiplinger’s go further. Why not, for example, plainly tell people that while most reverse mortgage lenders play by the rules, some don’t. Since those who do not are unlikely to have huge signs saying they cheat, borrowers need to protect their interests by getting help from outside professionals such as a CPA, fee-only financial planner or an attorney who specializes in elder law.

For the full story, see: Reverse Mortgages Get Better, October 28, 2008

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