Reverse Mortgages Compared to Sub-prime Mortgages
October 7th, 2009
Related Stories
- This Is Perverse
- Minnesota AG To Reverse Borrowers: Be Careful Out There
- New Protections For Reverse Mortgage Borrowers Debated In Washington
- Seniors Have $13 Trillion To Invest, Says SEC
- Consumers Union report raises concerns about reverse loans
Story Tools
A new report says that some practices in the mortgage market could result in some of the same problems that plagued the sub-prime mortgage industry. While reverse home loans can be a useful tool for senior citizens, the report by the National Consumer Law Center (NCLC) is a reminder that it is important to carefully investigate reverse mortgage products before signing up.
Reverse Mortgages Gain in Popularity
Reverse mortgage originations have been brisk during this recession. The annual volume for reverse mortgages is around $17 billion, according to the NCLC report. Also, more lenders have jumped into the reverse mortgage market since the sub-prime market tanked. A Government Accountability Office report shows that of 2,700 reverse mortgage lenders, 1,500 made their first loan in 2008. While some folks have had success with using reverse home loans to boost their income stream and save their home, others have been taken by fraud or other deceptive practices.
“In the reverse mortgage market, seniors face some of the same aggressive lending practices that were common in the sub-prime lending boom,” according to Tara Twomey, an attorney for the NCLC and author of the report. “Well-funded marketing campaigns and perverse incentives to brokers are targeting seniors’ home equity and using reverse mortgages as their tools.”
How to Protect Yourself
Legislators have already responded to these issues and the most egregious practices like selling expensive annuities along with reverse mortgages is now illegal. You can also guard against fraud by talking with a HUD-approved reverse mortgage counselor to learn more about these products. Finally, shop around to compare loan packages from several reverse mortgage lenders since terms of loans can vary.
- |
-
- |
RSS Feed
