Reverse Mortgage Guide

(Editor’s Note: On Sunday, the New York Times ran a front-page story regarding reverse mortgages. Entitled Tapping Into Homes Can Be Pitfall for the Elderly, the story described a homeowner who took out a $200,000 reverse mortgage. She also purchased $100,000 in deferred annuities at the same time, annuities which the paper says “are likely to pay her less than it is costing to borrow the money.”Commentator Dennis Haber looks at the issues raised by the story.

Reverse Mortgages are Good. Some Companies Are Bad. The New York Times Confuses The Two

The modern day reverse mortgage has been around since the late eighties. The first one closed in 1989. Until recently there have been few if any stories of senior reverse mortgage borrowers being coerced into purchasing other financial products as well.

The reason for this is quite simple. In the nascent years of the program, the only people who were “selling” (it is not really a product that is sold) this program were people that cared about and had a deep affinity for our elders. Like most new programs, it has evolved.

In the early years, it should be pointed out, the program often contained an equity-sharing feature, a feature which has long since been abandoned with most reverse mortgages. In the early years equity-sharing was a consumer concern. Today, the concern is with those firms that see the reverse mortgage program as a means to sell other products and with those firms that feel they have to coerce seniors into signing on the dotted lines.

In 2000, HUD created an “advisor” type program for those that were not licensed with FHA. This was seen as a way to get this loan out to more seniors. However, it did not take long for this idea to be transfigured into something sinister.

Alliances were made with those in the financial planning industry. Soon, it became common practice to maximize profits by selling annuities along with reverse mortgages. Some in the industry voiced disapproval over these practices.

Can reverse mortgages become another mortgage debacle? The answer to this is absolutely NO. The current mortgage trauma this country now faces is the result of poorly-designed mortgage programs. This is not the case with reverse mortgages. The issues are different.

Since the Alt-A and Subprime markets have dried up, some of the folks who sold those products have invaded the reverse mortgage industry. While some may pounce on the notion that keeping certain people out of an industry smacks of restraint on trade, I would suggest that safeguards are needed to protect our seniors from those who do not have their best interests in mind.

To put it more bluntly: Seniors must be protected from those miscreants who feel it is their job to take advantage of our elders. Shame on them. Shame on the industry for letting it happen. What the industry cannot do, Congress and the state legislators will do. And that’s not an appealing thought because misconceptions about the program also flourish within the halls of our state capitals and congress.

Attorney Dennis Haber is the author of the just-published, ground-breaking book, Piggy Bank Your Home: Tap Into The Power Of A Reverse Mortgage.

This entry was posted on Tuesday, March 4th, 2008 at 3:48 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.