Reverse Mortgages

DEBATE ON REVERSE-MORTGAGE RISKS HEATS UP

Posted on Tuesday, December 21, 2010


The Consumers Union and other advocacy groups have issued a report that has sparked debate about whether reverse mortgages are too risky for house-rich, cash-poor seniors. The controversy arrives just as the new Consumer Financial Protection Bureau (CFPB) is starting to look at the loans, which cater to borrowers aged 62 or older who own their homes outright. They receive a monthly cash advance, lump sum payment, or line of credit -- which does not have to be repaid until the borrower moves, sells the property, or passes away. The loans are poised to mushroom as the baby boom generation nears retirement, and lenders are aggressively expanding advertising and holding seminars at senior centers to sell the product. Consumer organizations are calling on the CFPB to step up oversight of the product to fight scams and other deceptive marketing. They say seniors should use the loans only as a last resort due to high fee and warn that the loan could affect their eligibility for government-assistance programs. Groups such as RetireSafe and the National Reverse Mortgage Lenders Association defend the loans, claiming the report fails to acknowledge recent pro-consumer changes. They suggest that reverse mortgages are good for some seniors in foreclosure, who do not plan on moving into an assisted living facility, or for those who lack other retirement funding.Wall Street Journal
Randall, Maya Jackson


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