Consumer Protections and Avoiding Abuses Discussed
Despite many negative and often inaccurate news articles about reverse mortgages in recent months, AARP released an Inside E Street webcast entitled Reverse Mortgage: Rescue or Trap
The webcast presents a fair, balanced, and informative discussion of this unique loan. Contrary to most newspaper articles or television segments which try to cover this many faceted loan in two columns or two minutes, AARP dedicates a full 26 minutes to the key questions of consumer protection and how to avoid abuses.
The interview style report includes a diverse group of people including an older adult couple, one Republican and one Democratic U.S. representative, a reverse mortgage industry insider, a consumer advocate, and a member of the media. An AARP survey (see page 86)
showed that 93% of those who went through with a reverse mortgage were satisfied with the result. However, it remains important to ensure older adults are protected when getting this type of loan.
Unscrupulous People Create Problems, not Reverse Mortgages
Every profession has bad eggs and reverse mortgages are no different. There are unscrupulous lawyers, politicians, plumbers, teachers, financial advisors (Madoff, anyone). Peter Bell, president of the National Reverse Mortgage Lenders Association
noted that one of the industry’s challenges is that “newcomers coming into the business who don’t always understand the nuances” of the reverse mortgage. It is usually one of these newcomers who use aggressive marketing or misleading sales tactics mentioned by the media.
While no industry is immune to having some unethical salespeople, consumer advocate Suzanna Montezemolo of the Center for Responsible Lending
, noted that “in a reverse mortgage…the loan itself often is not the problem.” Unscrupulous people are the problem. They prey on older adults who are financially strapped and desperate for help. They sometimes even convince seniors to use their reverse mortgage proceeds to buy an annuity or other inappropriate financial product.
An Option for Older Adults in a Difficult Economy
Barney Frank, chairman of House Financial Services, is a strong supporter of reverse mortgages and his committee improved it (and) did some protection against people being defrauded as part of the Housing and Economic Recovery Act of 2008
Due to the recent decline in the stock market, Mary Beth Franklin, Senior Editor of Kiplinger Financial Magazine
, observed that some retirees are using reverse mortgages as a bridge for five to ten years until their investments recover. Her advice to read all the information out there, look at other alternatives is wise no matter what you are buying a reverse mortgage or anything else. You have to go into this with your eyes wide open.
With this in mind, AARP?s webcast, Reverse Mortgage: Rescue or Trap
, should be recommended viewing for anyone exploring a reverse mortgage.
Photo courtesy of wwworks on flickr.com