Reverse Mortgage Guide

Speaking before the Senate’s Special Committee on Aging, Donald Redfoot with AARP’s Public Policy Institute, presented a 228-page reverse mortgage study to the Committee.

In his testimony, Redfoot said the survey found that “older homeowners were able to address a wide range of needs and desires with reverse mortgages. When borrowers were asked about the main use to which they had put their loan proceeds, the most frequent responses were retiring an existing mortgage (19 percent), home repairs and improvements (18 percent), improving the quality of their lives with extras (14 percent), and paying for everyday expenses (10 percent). 5 percent of borrowers said that addressing health and long-term care needs was the main use for their loans, most frequently to pay for prescription drugs. Borrowers in fair or poor health, especially those for whom a family member was acting with a power of attorney, were much more likely to report using their loans to pay for home care services and home modifications to remain independent.

“Though relatively small percentages of borrowers used their loans to make investments or purchase annuities and/or long-term care insurance products, these uses are generally not in the interests of consumers. The involvement of some lenders in marketing such financial products requires more consumer protections, improved consumer education and greater emphasis on ethical marketing practices.

“The survey found high levels of initial borrower satisfaction with HECM loans — 83 percent reported that their loans had completely or mostly met their financial needs, and 93 percent reported that their reverse mortgages had a mostly positive effect on their lives. These findings reflect short-term assessments because more than 9 in 10 borrowers had obtained their loans within the past 3 years, so we do not know the long-term satisfaction rate with reverse mortgages. (Indeed, more research is needed in precisely this area.) Consumers reported high levels of satisfaction with reverse mortgage lenders (90 percent satisfied) and counselors (95 percent satisfied), though non-borrowers were four times more likely than borrowers (23 to 6 percent) to report that they were not satisfied with their lender experience.”

Copies of the full report are available at:

http://www.aarp.org/research/credit-debt/mortgages/inb999_revmortgage.html.

This entry was posted on Friday, December 14th, 2007 at 6:46 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.