REVERSE MORTGAGES – Will Unwitting Seniors Become Victims or Reap Benefits?

REVERSE MORTGAGES – Will Unwitting Seniors Become Victims or Reap Benefits?

MANY EXPERTS WARN MANY SENIORS MAY FALL VICTIM TO PREDATORY LENDING PRACTICES WITHOUT REGULATORY CONTROLS IN PLACE!

The Reverse Mortgage!

Just like low-interest low-down-payment loans were several short years ago Cable TV is loaded with dozens of pitches directed at seniors for this long-established but still confusing loan product.

In a nutshell a Reverse Mortgage allows a Senior Citizen minimum age 62 to draw out equity from their current home for any reason. This Home Equity Conversion Mortgage (HECM) need not be repaid to the lender until the home is sold or the owner permanently moves out or dies.

According to a story by Real Estate Writer Mary Ellen Podmolik in last Friday’s Chicago Tribune many senior citizens use the equity for long-term care expenses or insurance. Some use if for vacations or other items. A few for Home Repair in preparation for the eventual sale of the home.

But many experts including U.S. Comptroller of the Currency John Dugan fear that older homeowners may be particularly vulnerable to aggressive marketing by Reverse Mortgage lenders much the same way those with blemished credit and low saved down payments fell prey to unethical sub-prime lenders during the peak of the housing boom a couple of years ago.

Many of these mortgage products lend at high rates of true interest with higher fees than traditional home equity loans which require periodic repayment. Often times loan terms are non-traditional and confusing even to those familiar with other mortgage products. However Reverse Mortgages are guaranteed by the Federal Housing Administration.

In 2008 more than 115000 Reverse Mortgages were written across the U.S. compared with less than 22000 written five years earlier. Over 11600 Reversed Mortgages were written in April 2009 alone according to data by the National Reverse Mortgage Lenders Association.

These increases come amidst a sluggish housing market in most U.S. Cities including Chicago and its suburbs in which some home values and the resultant equity against which to draw have fallen by 18% or more. However other assets held by seniors including 401K Accounts IRA’s and Pensions have also fallen considerably in value making the Reverse Mortgage all the more attractive and sometimes necessary.

Senior Advocacy Lobbyist AARP is concerned that some Reverse Mortgage Lenders have resorted to high-pressure too-aggressive practices for selling these loan products and that these products may not be a strong match for everyone. Comptroller Dugan wants to make sure these lenders adhere to lending compliance standards and warns more tighter legislation may be necessary.

DEAN MOSS & DEAN’S TEAM CHICAGO