Homeowners are turning to reverse mortgages to get money out of their homes. These homeowners are senior citizens and it is leading to a rise in demand for reverse mortgages. This rise in demand is also putting many senior homeowners at risk of foreclosure.
A reverse mortgage loan is not due until the borrower passes away. But, what seniors are not being told is that the loan comes with hefty charges, including closing costs, origination fees and compounding interest on the principal of the loan. A reverse mortgage can be very risky for borrowers who don't fully understand the terms of the loan or how quickly fees and interest charges can add up.
A report by Consumers Union was recently released. It warned that seniors taking out reverse mortgages have a high risk of losing their homes while they are still alive.
Several groups have called for strong oversight from the new federal Consumer Financial Protection Bureau. This bureau is being launched by the Obama administration appointee, Elizabeth Warren, as part of the financial reform legislation that was passed this year.
Recent reports list concerns about attempts to sell borrowers other products at the same time, such as annuities or long-term care insurance, which is causing many borrowers to default on their reverse mortgage and fall into foreclosure.
The lesson that can be learned from others who have done reverse mortgages is that a reverse mortgage should be a last resort for seniors who want to continue to live in their homes but have no other alternatives of income.
You can find tips and advice about reverse mortgages on the Consumers Union website at www.consumersunion.org.
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