As we dig out from the 'pop' of the great real estate bubble, a lot of the blame for what happened is being laid at the feet of those unethical mortgage lenders who fueled the sub-prime mortgage market. And rightfully so (disclaimer--I am NOT talking about the many wonderful lenders who have been so instrumental to building my business).

I read an article today, The Next Big Real Estate Boondoggle (click on title to read) which asks what happened to all those lenders? Since many of them were never prosecuted, are they still practicing?

According to the article, many of these shady lenders have moved into another market, the Reverse Mortgage market. While the sub-prime market lenders often preyed on less-savvy borrowers, the reverse mortgage lenders are poised to take advantage of those folks who have worked hard all their lives and built equity in their homes, the elderly. You can see how this would happen...it is like fruit ripe for the taking: there is equity in the property, there are often difficult financial situations, and you have a population that may have counted on selling their house at a certain price and time, and is now unable to do so.

I have always believed that there is a place in the market for sub-prime mortgages and I believe there is a place in the market for reverse mortgages.  I know that is not always a politically correct opinion  A new product is created when there is a need.  There are borrowers who are not great candidates on paper who will make wonderful borrowers and a subprime loan would be perfect for their situation. There are also elderly folks who would greatly benefit from the proceeds of a reverse mortgage.

In a perfect world, we would all be able to protect each other from making stupid decisions or from signing on with a corrupt lender. Unfortunately, that is not possible.

I know many wonderful, wonderful lenders who will be straight up with potential reverse mortgage candidates--and I am sure you do, too. If you are considering a Reverse Mortgage, please make sure you are dealing with a reputable lender. Be sure to ask about fees and charges and be sure that you understand exactly what the terms of the mortgage are. If you  have a relative, neighbor, or friend who might be considering a reverse mortgage, ask them if they would like some help navigating the market and finding a good lender who will help them to refinance in to the right reverse mortgage product for them.

If we learned nothing from the crash of the real estate bubble and the melt-down of the mortgage market, let's hope that we all learned the importance of reading our paperwork, researching our options and making informed decisions.

Remember, if it sounds too good to be true, it probably is!