Bad actors continue to prey on seniors
Filed under: Banks, Borrowing, Home, Insurance, Real Estate, Retire, Fraud, Mortgages
Bad actors have solidly shifted their attention to reverse mortgages, causing a top consumer organization to warn seniors to choose such loans carefully. A new report by the National Consumer Law Center likens the aggressive lending practices in today's reverse mortgage lending to those common in the sub-prime mortgage heyday -- featuring some of the same players.
"Well-funded marketing campaigns and perverse incentives to brokers are targeting seniors' home equity and using reverse mortgages as their tools," attorney Tara Twomey said in the NCLC news release.
The senior market is a goldmine, the report warned, because the population of senior citizens is expected to grow from 35 million in 2000 to 65 million in 2025. The top reverse mortgage lenders were Financial Freedom -- primarily a wholesaler -- followed by Wells Fargo Bank and Bank of America.
The report adds heft to similar warnings issued this summer by the FBI, covered by WalletPop at the time.
A month before that, U.S. Comptroller John C. Dugan told a gathering of bankers: "While reverse mortgages can provide real benefit, they also have some of the same characteristics as the riskiest types of subprime mortgages -- and that should set off alarm bells."
Alarm bells, indeed. The volume of mortgage equity seniors have tapped into through reverse mortgages rose to more than $17 billion this year, a record pace. More than 100,000 seniors were involved.
Granted, allowing seniors to convert home equity into cash without moving out can be practical when they need to supplement their income or pay for unexpected medical costs or home repairs. But, in the worst scenarios, the NCLC reports, the bad actors take on the role of middle men, encouraging the seniors to apply for the loans and, in the process, free up their home equity. Then, they may get seniors to buy expensive insurance or invest in annuities with high commissions. Guess who profits from those commissions?
The NCLC joined with U.S. Sen. Claire McCaskill, author of a 2008 law strengthening consumer protections against predatory marketing practices in reverse mortgages. McCaskill plans to advocate for additional legislation to shore up the government's regulation of this corner of the lending industry.
In addition, the NCLC is callng for the following protections:
- Create standards that require lenders and brokers to arrange deals only if they do not harm the financial situation of seniors.
- Improve borrower counseling options
- Ban yield spread premiums, which give brokers incentives to favor lenders over borrowers.
- Regulate those reverse mortgages and other equity conversions that are not federally insured and collect data on them more consistently.
Reader Comments (Page 1 of 2)
11-05-2009 @ 1:55AM
jj said...
Unlike this article states, Federally insured reverse mortgages do not allow cross selling of the type of products stated here. They are very regulated and HUD counselors advise a senior before a reverse mortgage can proceed. Usually family is involved in the process to help advise the senior.
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11-05-2009 @ 3:30PM
TRR said...
There are some major flaws in the NCLC report as well. See explanations here: http://www.reversereview.com/spotlight/448-response-to-the-recent-nclc-report
11-07-2009 @ 9:06PM
bosco said...
Same ole, same ole. Where are the regulators on this? Business as usual again. :(
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11-07-2009 @ 9:08PM
b said...
It's important to note a big plus to reverse mortgages. Yes, there are high closing costs, but the bulk of these costs cover mortgage insurance. With a reverse mortgage, you are guaranteed to never owe more money than the amount of the mortgage. This gives the elderly the ability to continue living comfortably in their own homes. Not only do they not have a monthly housing payment, but they have a few options. They can receive a lump sum, a line of credit to draw off of as needed, or a set monthly payment/income. At this point, it is often a great alternative to a HELOC, because there are no income or credit requirements once you've met the minimum age, nor are there monthly payments required. If the homeowner passes away and the home has declined in value (think about the current market), their children or heirs will never be responsible for paying a debt on the home. Reverse mortgages have gotten a bad reputation and aren't the solution for eveyone, but for some they can be a Godsend.
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11-08-2009 @ 12:11AM
gennie said...
The reverse mortgage was NO GODSEND to my parents. My father, dying with prostate cancer, made one of these loans. My mother never handled the family finances, and went along. I am sure my father would have been able to defend himself and know better, but at the time, he thought that the mortgage company paid the taxes. The cancer had spread to his brain, and he was never quite sure what the mortgage company originally said about that. He died in July08 and now my 80 year old mother is getting threatening letters because her property taxes are not being paid and she has nothing but her tiny social security check to live on. I try to help but I am living on social security myself. Just dont trust the bastards.
11-08-2009 @ 1:37AM
dllerma said...
UNLESS: someone pretends to be responding to a request for a reverse mortgage - but really does a refinance with an elderly woman who doesn't understand what's happening - and they lower the payments to keep the deception going past the "too late to withdraw" deadline - and she loses her house of 45 years. I hope they ALL burn in hell.
11-08-2009 @ 4:12AM
Fluffy said...
Sorry, there is no plus, except for the vultures!
11-07-2009 @ 10:19PM
InsideQuestions said...
Does anyone else get the impression that our country is turning into one gigantic whore?
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11-08-2009 @ 8:59AM
Lara said...
Yes, Insidequestions, I'm starting to feel that way too. The more money one has, the more people that appear on the doorstep to try to get hold of some of that money. And bankers are one of the worst culprits.
11-08-2009 @ 4:11AM
Fluffy said...
Yes, very much so!!!!
11-07-2009 @ 11:42PM
Jerry Kennedy said...
ONe trick National Rewverse Mortgage lenders use is the inflated appraisal. An example is a friend was using a natioal lender and his condo appraised for $350,000 by that lender. he shyed away after finding out comparables in his complex were selling for $250,000 a 100,000 differance in value. It seems the natioal lenders appraisal company used "comps" compaibly priced units in a highre priced neighborhood 10 miles away thus inflating the clients value of his unit. The lender and the appraiser were in bed together to get a higher priced loan. The lender tells the appraisal "appraise it for this amount or you will get no more appraisal business from me." They both belong in jail. But NJ State Real Estate officials take no action. Future Gov. Christie must hold their feet to the fire.
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11-08-2009 @ 4:13AM
Fluffy said...
These mortgages should be banned. I couldn't agree with you more. They are enough to make you sick, which I have been every since my mother dies last November, 2008. Well, my two brothers and I are are ready to lose our home because my mother had a reverse mortgage with Morris-Griffin. We can't get financed because of income (illness in family, et al.). Because fo the rule of having to be age 62 (which we are not) we couldn't do a loan modification. My mother always said she wanted us to have a home ( and I used vfunds for a home that I was saving up for to help her out). Anyway, on November 14th, we could be foreclosed upon. We are trying to sell the house and trying to wor on improvements at the same time. I am sick to my stocmach everyday because of this. She did not understand how it worked, because when she found out that she didn't have long to live ( and she died sooner in a few weeks from finding out that she was full of cancer after a week prior to that the doctors tod her she was cancer free), she asked me if she could put the house in my name since one of my brothers had child support and the other one is diabetic and on disability.. I said to her that she left the house to my two brothers and myself, and that there was a reverse mortgage on it. She did not understand it, was never counselled, and now we are facing complete turmoil. I wish they would put these SOB's in jail and throw away the key. They sicken me.
11-07-2009 @ 11:32PM
Jerry Kennedy said...
PS: The lender doesn't even worry about about the loan since they are backed by HUD Insurance which is very expensive. When the unit finally is sold ..if the amount due is higher than the value of the home the HUD insurane pays off the loan. Since the value of homes has declined dramatically in recent years the original loans are all jepoardy of being paid off by HUD Insurance that the reverse mortgage client had to purchase. Uncle Sam will be once again on the hook for billions. Many of the comments made above seem to be written by reverse morgage lenders or their agents. BUYER BEWARE
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11-07-2009 @ 11:52PM
glenn said...
The ":has been" actors that pimp for these reverse lending crooks make me want to puke.
The charges to establish these loans are criminally high, and then the lender has control over the seniors financial life.....\
Avoid them like the plague of "AIDS"..
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11-08-2009 @ 4:12AM
Fluffy said...
You couldn't have said it better. I am looking for mortgage work, but when I see Loan Originator for Reverse Mortgages, I skip right over it. They make me want to puke, too.
11-08-2009 @ 12:33AM
james said...
I dont why anybody would do this!!!
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11-08-2009 @ 4:09AM
Fluffy said...
You are so right! It is like jumping into the Red Sea! These mortgages need to be banned.
11-08-2009 @ 12:38AM
KCW said...
The Bank has no control over anyone.
As long as the Homeowner pays their Property Taxes and Insurance, continues to live in the House the Bank cannot and will not do anything.
In addition a Government Counselor must discuss the matter with Homeowner in advance to make sure the Reverse Mortgage is appropriate, and that they are not being coerced. Without the Counselor Certificate the deal, which is also vetted and insured by HUD will no go through.
If a person is not planning to live in their house for at least the next 10 years a Reverse Mortgage is probably not appropriate because of the relatively High Fees and the HUD Insurance. If a person is and can live more than 10 years in the house and doesn't have the cash flow to remain in their home otherwise it is a Fine Product. Best if you get if from a Major Bank though such as Wells Fargo or Bank of America.
The Bank Does Not Own Your Home!
The Homeowner is still the Recorded owner of the home at the County Title Office.
I'm am not a Loan Officer but an Independent Notary whom has seen dozens of people saved from ruin, or
just lifted a little higher to enjoy their
Senior Years. I'd get one if I was Old Enough just to stop making payments
until I'd paid off all my plastic.
Most people vehemently against this vehicle don't understand a damn thing and spew misinformation. Its appropriate sometimes and sometimes its not. Learning the difference is easy. Living there a long time and don't have the Income you need to live the way you wish. Yes! Not living there a long time or have sufficient cash flow. No, don't get one
its too expensive for a short term loan.
If you have enough money to live the way you wish. No, again its too expensive if you don't really need it.
If a Homeowner with a Reverse
Mortgage has a problem with the
Bank they can't resolve on their own
HUD will step in because they Insure
the Loan. (FHA/HUD).
Now everybody understands.
Thank You.
KC Wright
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11-08-2009 @ 4:11AM
Fluffy said...
Go blow it out of your ear.
11-08-2009 @ 4:10AM
Fluffy said...
Gennie,
I am going through the same thing same thing. My mother passed away last November, 14, 2008, and had a reverse mortgage. She took it out because my father who cashed in his life insurance after they had an argument and left her with nothing to bury him with. That is when it all started - she borrowed on our paid off house. Now, my two brothers and I, are facing the foreclosure on the house next week because it needs to be paid back in full. We can't get fianced because of income (there is an illness, an unemployment, and part time only work employment problem here). We are trying to sell the house, but people want it dirt cheap. I am so sick over this and am trying to find full-time work, that I can't stand another day of this stress. We have no where to go. My mother didn't understand this reverse mortgage, and died sooner than the time they told her. She could have done a loan modification so that we could just take over the payments, but she was too sick with cancer and a pitatary gland tumor to do this. We offered to make payments on the reverse mortgage, and they wouldn't accept it, and said that it had to be paid back in full. They said you have to be 62 (which we are not) in order to do a loan modification. To top it off, the banks are willing to work with us to refinance if we could only get past probate to put it into our names (that is where an irrevocable trust would have come in handy.). There is all this red tape that is going to make us homeless very shortly if we don't do something to save us. We have $150,000. in equity that could go right down the tubes because of these SOB's. However, I feel you mother's pain, and the reverse mortgage company should be able to put the taxes on the line of credit that your father had with the reverse mortgage - we had to do that. These people that push these mortgages should be put in jail, and the key disposed of in the Red Sea, where they like to put the elderly. REVERSE MORTGAGE SHOULD BE BANNED AND NOT ALLOWED ANYMORE. Our situations are special, and they should be considered by these pirates. There is a Federal Agency that wants to hear complaints about these lenders since they are cracking down onthese lenders. HUD, I read, was cited in July of this year for fraud. here is the website: ww.fraudnet@gao.gov, and tell them your story - I am going to email them, too. Something has to be done - my mother wasn't even counceled on this loan, and had no clue what was to happen after she passed away. All she ever said was that she wanted us to have a home.
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