Seniors warned over reverse mortgages |
By KATHLEEN LYNN Vulnerable senior citizens are being targeted by aggressive and exploitative marketing of reverse mortgages, the National Consumer Law Center said Tuesday. In a new report, the law center compared some of the tactics used by the reverse mortgage industry to those used by subprime mortgage lenders a few years ago. The report accused some reverse mortgage lenders of advertising reverse mortgages as "a government benefit" that seniors are entitled to, rather than what they are -- loans against the value of their homes. In addition, the law center charged, some loan companies reward brokers with higher commissions if they put clients into more expensive loans. The report called for a federal ban on such rewards, called "yield spread premiums." The law center also called for more funding for housing counselors. Before getting a reverse mortgage, borrowers are required to get independent counseling, but the law center said the counseling sessions often last less than an hour, rather than the two to three hours needed. The report also said lenders should be required to make sure a reverse mortgage is suitable for a client before writing the loan. A spokesman for the reverse mortgage industry disputed many of the report's findings, arguing that it's not fair to require brokers to judge whether a loan is suitable for a client. "Who can determine what's suitable for someone, other than the individual themselves?" said Peter Bell, president of the National Reverse Mortgage Lenders Association. "How can a lender decide what's best?" Bell also said there was no evidence that the kind of practices that led to excesses in the subprime market are surfacing in the reverse mortgage industry. But he said that ads implying that a reverse mortgage is some kind of government benefit are "a wholly unacceptable method of advertising that violates our code of ethics and responsibility." Reverse mortgages have become more popular during the recession. The National Reverse Mortgage Lenders Association projects the number of loans for the year at about 150,000 loans, up 30 percent over last year. The loans allow seniors to tap their home equity and do not have to be repaid till the homeowner dies or moves. But they are not right for everyone, particularly people who plan to move in just a few years, because they typically have high upfront fees. *** (SIDEBAR) Fast facts With a reverse mortgage: * Homeowner must be 62 or older. * The home must be the primary residence. * No repayment until homeowner moves or dies. * Interest rate is adjustable. * Amount of loan varies according to homeowner's age and property's worth. * Money can be taken as lump sum, monthly payment or line of credit. * Fees vary among lenders, so it's worthwhile to shop around. * For more information, try hud.gov or aarp.org. *** E-mail: lynn@northjersey.com (c) 2009 Record, The; Bergen County, N.J.. Provided by ProQuest LLC. All rights Reserved. A service of YellowBrix, Inc. |
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