Tags: Reverse | mortgage | seniors | aggressive

NYT: Reverse Mortgages Kicking Seniors Out of Their Homes

Monday, 15 Oct 2012 12:53 PM

Reverse mortgages, designed to give older homeowners money and let them stay in their homes, reportedly are getting seniors kicked out of their houses.

Smaller mortgage brokers, including former subprime lenders, are aggressively targeting senior homeowners, who end up unable to handle the fees that come with reverse mortgages on top of taxes and other costs associated with home ownership, The New York Times reported, citing research from federal and state regulators.

A reverse mortgage is a loan available to people over 62 years of age that enables a borrower to convert part of the equity in their home into cash, according to the National Reverse Mortgage Lenders Association.

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The loan is called a reverse mortgage because the traditional mortgage payback stream is reversed.  Instead of making monthly payments to a lender (as with a traditional mortgage), the lender makes payments to the borrower, the association said.

The borrower isn’t required to pay back the loan until the home is sold or otherwise vacated but must remain current on tax and insurance payments, the association said.

Widows can be evicted if their names are not on the reverse mortgage after their husbands pass away, with some saying they were pressured to keep their name off the deed. In some cases, when one spouse is younger than 62, only the older spouse’s name will appear on the reverse-mortgage documents, Bloomberg News has reported.

The Consumer Financial Protection Bureau, meanwhile, is drafting new rules that would require better disclosure and stricter supervision.

“There are many of the same red flags, including explosive growth and the fact that these loans are often peddled aggressively without regard to suitability,” Lori Swanson, the Minnesota attorney general who is working on reforming the reverse mortgage market, told The Times.

Others point out, however, that reverse mortgages are tools senior citizens should consider, especially for those struggling to maintain income.

“Americans are going to need reverse mortgages,” wrote economist Alicia Munnell, a leading retirement expert and head of the Center for Retirement Research at Boston College, according to U.S. News & World Report.

“Most households are going to find that their retirement incomes fall short of their retirement needs and will experience a decline in living standards. Being able to tap their home equity — often their single largest asset — provides a source of income that could supplement Social Security and the income generated by their meager 401(k) balances.

“To the extent that flaws exist in the reverse mortgage market, they need to be fixed,” Munnell added.

“But a future without reverse mortgages would be a very grim one indeed.”

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Reverse mortgages, designed to give older homeowners money and let them stay in their homes, are getting seniors kicked out of their houses.
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Monday, 15 Oct 2012 12:53 PM
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