financialcounselor

New Report Shows Dangers of Reverse Mortgages

In Housing Horror Stories on July 11, 2012 at 11:17 pm
MANY SENIORS WHO TAKE ON REVERSE MORTGAGES DON’T UNDERSTAND RISKS

I’ve written a few times in this little blog of mine about senior citizens who came to me for help after taking out a reverse mortgage on their home, and for one reason or another, are in danger of losing their home because of the reverse mortgage. You wouldn’t believe how often this happens, even though reverse mortgages are touted as plum dandy for seniors who need money, but want to keep their home.
Well finally, somebody decided to get of their keister and do some research on the problems reverse mortgages can cause and how dangerous they can be.
The Consumer Finance Protection Bureau looked into the issue and recently issued a report about the risks and dangers of reverse mortgages.
With a reverse mortgage, a senior citizen borrows against the equity in their home, but the money doesn’t need to be paid back until the homeowner sells the house or dies. Basically, not until they no longer live in the property. Until then, the borrowed money accumulates interest, and the equity the senior still has in the home diminishes as the interest piles up.
The CFPB found that a lot of senior citizens who take out reverse mortgages don’t understand that concept, much less all the other dangers they need to be aware of with these loans.
One major problem the research found was that there is a ton of misleading advertising about reverse mortgages, and the risks of seniors to be scammed and victimized by fraud is huge. It also found that even though seniors who take on reverse mortgages are given disclosures about the loans to read, these disclosures are tough to understand, especially if the senior didn’t happen to spend an entire career studying the intricacies of high finance.
Finally, the report ends by saying that because of the current economic situation that sees pensions disappearing, investments that don’t generate livable incomes, and social security benefits that don’t keep up with the cost of living, more and more seniors will take on reverse mortgages.
So there you have it. Another banking innovation that was touted as something to help people is actually wrecking lives.
You can view the full report at:
http://files.consumerfinance.gov/a/assets/documents/201206_cfpb_Reverse_Mortgage_Report.pdf

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  1. I find it highly disturbing that the CFPB admits that they didn’t consult or survey any reverse mortgage borrowers to find out what actual consumers felt about this program. Which means to me they had an agenda going in……how do they KNOW any of they things they assert about borrowers in this report??

  2. I doubt if I’d ever involve myself in a reverse mortgage. Articles in magazines from “Woman’s Day” to “Forbes” have chronicled the many pitfalls of this program. But (grin), I can’t resist making one criticism of the anti-Fred-Thompson crowd – the people who say he’s cheating Jessie (a newspaper street vendor) – tossing him a quarter for a newspaper that has to cost at least 75 cents.
    .

    Unless you have a very large high-definition television, what makes them so sure that Fred is tossing Jessie a quarter? Once every month, for pocket change, I go to my credit union and buy dollar “coins” by the roll. They’re a lot more convenient that carrying a wad of one-dollar bills. And dollar coins are roughly the same size as a quarter. So, Fred could be tossing Jessie a dollar coin – with an implied “keep the change” unspoken. I can’t be the only person who prefers carrying dollar coins over dollar bills.
    .

    As a matter of fact, I almost wish the U.S. Mint would start producing $5 coins – doing away with the $1 bill and $5 bill altogether. On the other hand, the way prices are going, I also almost wish they’d bring back the $1,000 bill.

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