Today I want to write about something serious, something that really upsets me. A friend of mine sent me an article(link), a friend and a financial advisor who understands reverse mortgages. The title of the article from USA Today reads:
“Seniors were sold sold a risk free retirement with reverse mortgages,
now they face foreclosure”.
Just that, drives me crazy, the mortgage industry has created and regulated protection for things like this. You have to deal with a sales person, granted sales people can lie, we know that. But then there's other types of protection, that came into place in the year 2000, and that's reverse mortgage counseling.
Why would you have to go through this? The article says it could be as little as 20 minutes which is a lie. 45 minutes to an hour is the fastest I've seen counseling take. I've never had someone cancel an application after receiving counseling, at least with me. I’ve heard of others haven’t gone through the process, because they hear the truth from the counselor. We tell people all the time: “If you don't pay your taxes, and you don't pay your homeowner's insurance, you will be foreclosed on.”- It's not risk free!
Either way, this scathing article on the reverse mortgage industry, talks about how we are “red lining”. What's “Red Lining”? Red lining was something that was done in the 30’s, where they would literally draw red lines around certain areas, and they would target low income points, to keep loans out of low income ranges: Discrimination.
Mailers, TV commercials, newspapers, social media. Publicity is targeting everybody. Do you really think a loan officer wants to deal with a property that's in shambles? (Which just makes a loan harder to close) No! We want the higher loan amounts, higher home values. The ones that go right through because they have great income, great credit, and the property is in great condition. But here's another example of the media taking something and sensationalizing it, and making the mortgage industry look like it’s just a bunch of crooks taking advantage of people.
I’m a Certified Reverse Mortgage Professional that happens to be on the ethics committee of our National Reverse Mortgage Lenders Association. With that being said, the ethics committee, looks at a lot of violations like this, people getting in trouble for doing things that they are not supposed to be doing, ethical issues.
But this goes on to talk about individual cases, for example, one gentleman in this article named Leroy. It says Leroy, 10 years ago, “forgot to pay” his homeowner's insurance. Can you see something wrong there, right off the bat? Because if you or me were under 62 years old, without a reverse mortgage, and we just forgot to pay our homeowner's insurance, what would happen? The lenders would put forced placed insurance on our home! It's more expensive than the insurance that you would get on your own, and it would add unto a loan amount, leading to foreclosure. But… “he was sold” on this “risk free environment” without foreclosure opportunity. If you’re a homeowner, and you don't pay your taxes, you're going to get foreclosed on, period.
The article keeps on giving. Later it talks about lenders not having any need to look at people’s credit… False! In 2015 we started looking at credit and income in a stricter manner, but before 2015 we still looked at credit. We still wanted to know what was going on, but regardless, it's just more strict now.
Take a look at the article, keeping in mind that most of this is not true. If you work with a Certified Reverse Mortgage Professional, you work with someone who knows what they're talking about, we help people over 62 years of age, use their home as part of their retirement, with some risk! But if done right, (like I did for my grandparents in 2008) it'll really help them.
Trust the professionals. I’m here to help you!