Reverse mortgage abuses hurt elderly
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.