Reverse mortgages have hidden dangers
Panelists at the Information Management Networks 15th annual ABS East gathering in Miami Beach conference said that in the last two years reverse mortgages have moved beyond the needs-based senior and now see a significant mix of borrowers tapping into the market. This year alone, the percentage of owners with homes valued at above $400,000 is increasing to up to 39% of the reverse mortgage claims in some markets. The panel also said the market is set to grow dramatically, with predictions that the next leg of growth in structured finance will come by way of reverse mortgage resecuritizations, despite warnings that the product is particularly vulnerable to misuse and even fraud.
Annual reverse mortgage volume has topped 110,000 units and $17bn, with top banks like Wells Fargo and Bank of America and large insurance companies like Genworth and MetLife leading the way. Despite a slowdown in originations due to the recession, reverse mortgage originations are continuing at a record pace. In the reverse mortgage market, seniors face some of the same aggressive lending practices that were common in the subprime lending boom, said Tara Twomey, an NCLC attorney and author of the report. Well-funded marketing campaigns and perverse incentives to brokers are targeting seniors home equity and using reverse mortgages as their tools.
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