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The Dark Side Of Reverse Mortgages

I've previously commented on reverse mortgages...... in a negative manner. I do so again!

Personally, whenever I see media cracker jacks hyping some product or position, I cannot help but feel that Madison Avenue is in the process of attempting to screw, blue and tattoo the public.

So it is with reverse mortgages. Personally, I have had only one experience with this type of loan, but that one experience, as far as I am concerned, was enough to last a lifetime, and because of it I will probably be Devil's Advocate Number One against reverse mortgages for the rest of my life. In a prior post I pretty well explained what had happened in the case of a reverse mortgage as it related to a client of mine a year ago.

The latest article that I read regarding reverse mortgages included the following comments:

"Vernie Anderson almost fell for the phone pitch. ‘Turn $30,000 into $90,000 with your own Web page,' he was told. A reverse mortgage could get him the cash he needed to start an online business." (wait till you read the paragraph following that one.)

The article continues, later, with: "Lenders from the virtually dead subprime market are migrating to reverse-mortgage loans, using the same hard-sell, high-fees tactics that marked the subprime crisis. Many buyers regret the move a year or two later, according to consumer advocates who are working to undo problem loans."

http://www.startribune.com/business/27932279.html?elr=KArks:DCiU1OiP:DiiUiD3aPc:_Yyc:aULPQL7PQLanchO7DiU

Best regards....

Posted by Terry Kuehn ~ Self-Directed Roth IRA Associate on 09/06/2008 06:51 PM

Comments (5)

Reverse Mortgage in the Mortgage / Finance Channel

reverse mortgage, mortgage pain, hard sell, high fee, tactics, subprime, regret, victim

Post is included in group: Everything Washington
Post is included in group: Puget Sound - WA Real Estate
Post is included in group: Retirement Planning
Post is included in group: Silent Majority
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5 Comments on The Dark Side Of Reverse Mortgages

SEP

2008

Terry,

I can understand your reluctance, once bitten twice shy...so I get why you are reluctant. With that said I have seen the good that this financial tool can do. I have seen the Reverse Mortgage save a person from going into forclosure, I have seen persons saved from bankruptcy. Please don't condem the reverse mortgage for the miss use by a few bad people!

It's interesting that the article you sight starts off with how it saved one couple and digresses into how some other person was trying to use it as a way to fleece a senior. It shows both extremes. It is my hope that the bad people will always be caught and punished for their misdeeds, but in the meantime we shouldn't thow out the baby with the bath water!

Perhaps you have eaten a bad meal at a favorite restaurant, did you stop going there from then on or did you give them a second chance? Hopefully the restaurant cared enough to set it straight. As an industry (reverse mortgage), they are trying to elimante the bad originators, give them a chance!

Greg King

Terry ~ Great Post. The fees for a reverse mortgage is unacceptable. This is another way of lenders taking advantage of our seniors.

SEP

2008

Greg and Nicholas, thank you for your input and feedback......

In most cases, it takes three strikes to put out a batter. I grant that I've only been exposed to strike 'one,' but in the case of my client at that time, that strike was enough to put my client INTO bankruptcy. Granted, a particular set of circumstances might have precipitated the next set of circumstances, but, never the less, the end result devistated her. And as it turned out, she really did not understand many of the underlying elements of the reverse mortgage process.

I am not a social scientist, but what senior citizens that I have been exposed to over the years has basically been an eye opener in that I firmly believe that the average senior desiring to take out a reverse mortgage just does not have the _______ to fully understand that the negative realities have far more negative aspects than positive realities have positive aspects.

BUT, in the long run, I guess, caveat emptor has been around for a lifetime......

Best regards.....

SEP

2008

Terry, What I think is so tragic about these loans is that most are an FHA product (HECM) and people trust FHA. They don't realize how expensive these loans are. And the government should be ashamed for allowing these lenders to charge such high prices.

In some cases a reverse mortgage is helpful to seniors that own their homes but can't get by on their current income, but in most cases there are better solutions.

Bill Roberts

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