2
Reverse mortgage abuses hurt elderly
Mortgage troubles
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF STORY
This morning the National Consumer Law Center is scheduled to release a report on abuses in so-called reverse mortgages. Experts say a growing number of lenders are targeting the home equity of seniors. We get the story from Marketplace's Joel Rose.
Joel Rose: Lenders tend to play up the benefits of reverse mortgages in TV commercials like this one with actor James Garner.
James Garner: If you're 62 or older, I'd like to talk to you about something you know. It's called a reverse mortgage, and it's a safe, easy way to turn your equity into tax-free money.
In a reverse mortgage, the homeowner gets cash from the bank. That loan is paid back with interest from the proceeds when the house is sold.
Prescott Cole: Those loans are pits of debt. They get bigger, and they get bigger.
Prescott Cole is an attorney and advocate for the elderly in California. Cole says reverse mortgages involve high interest rates and hefty fees that create incentives for lenders to market them aggressively.
Cole: It's all about happiness, get that money. It's a win-win until the senior runs out of money.
Cole says seniors can wind up owing more than the house is worth. Unless there's more regulation, he says thousands of seniors could be caught in loans they ultimately can't afford.
I'm Joel Rose, for Marketplace.
Joel,
I am sorry to see that you didn't question Mr. Coles blanket statements...they are amazingly onesided!
Mr. Cole states that "reverse mortgages involve high interest rates and hefty fees" both statements are designed to inflame and not close to reality. The Government accounting office just released a report that the cost of a reverse mortgage is approximately 1% more expensive than a conventional mortgage, but with the reverse mortgage you do not need good credit or income to qualify, and the loan is a non recourse loan! As far as the interest rates are concerned I would like you to try to get any mortgage yourself today with no credit or income requirements and get a fixed rate loan of 5.6% !
Do the loans get larger over time? No big surprise the answer is yes, but only because that is the purpose of the loan itself (to provide needed money to a senior WITHOUT A MONTHLY PAYMENT).
Here is the last news flash for Mr. Cole; in the article he states "seniors can wind up owing more than the house is worth", well the MIP (Mortgage Insurance Protection)prevents that from happening. If a seniors home value is less than the amount of the loan, the difference is paid by this insurance fund....and the loan is not even due until the last senior on the reverse mortgage decides to move or passes on; On my regular mortgage if I die or sell my home for less than I owe, the mortgage holder can come after me personally- not so for a senior with a reverse mortgage!
Please be more careful in selecting your experts, Cole is obviously just trying to scare up buisness for his practice!
