Reverse Mortgage Scam?

Mark, 

Can you lay out your concerns about Reverse Mortgage.   Some of the upfront fees on Reverse Mortgage (Origination Fees and upfront Mortgage Insurance Premiums) are higher than I would like them to be, however the rate of interest on the loan is extremely good.   Yes the loan is an Adjustable Rate Loan however 1.50% above the index versus traditional ARM where the rate is normally 2.50% above the index could justify the upfront fees.  

Let me know your concerns, please. 

Scam, huh?  Sorry, you are misinformed.  Tell my 350+ clients that they should not have gotten into a reverse mortgage and they will tell you that it is the best thing that has happened to them.  I get calls, notes, letters....I am in touch with my clients, some who took out the reverse 3 years ago.  To a person, they tell me it was an answer to their prayers, a Godsend......  Most of them were making mortgage payments and they were so financially stressed that they had no joy in life.  None of them wanted to sell their homes -- too many memories and the hassle was not worth it.  They want to age in place.  The reverse paid off their existing lien so that they no longer EVER have to make a house payment.  Talk about financial security! 

Tell Mrs. B that she should not have done this and she will say you are nuts.  Her husband died, reducing her income.  She could no longer afford her house payments.  Yes, she could have sold, but there wasn't that much equity in her home.  Where would she go?  Where would she put her animals?  Her home of 45 years is her haven, her sanctuary..  That is where she raised her kids and where she held the hand of her dying husband. Now, thanks to the reverse mortgage, she no longer has a house payment, she has some extra cash to spend, and she can stay in her home until she "moves up".

So what if they are expensive?  The fees will eventually be paid out of the equity of the home.  Who is hurt by that?  The kids?  Yes, the parents are spending their kids inheritance.  But that is their decision.  It is their money.  As long as the senior has full knowledge of the consequences of ther reverse on their equity, they can make an informed decision.  And 99% of the kids I talk to WANT Mom & Dad to live a happy life and spend their equity.  They don't want anything from the home.  Why should Mom & Dad leave all that equity and deny themselves some pleasure in their later years?

I am a responsible, ethical lender.  I educate the senior, their families, and their advisors before I put them into a reverse mortgage.  If the benefit is not there, I will be the first to tell them.  They are NOT for everyone.  But, for many of our seniors, the reverse mortgage is their BEST option and it gives them financial peace of mind in their later years. 

I thank God that this program is available for Seniors and so do they.  Please read my blog post about seniors who homes are being lost due to risky "forward loans".  That would not happen with a reverse.