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A balanced report on reverse mortgages by AARP
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Despite a spate of negatively biased (and often inaccurate) news articles about reverse mortgages in recent months, AARP released an Inside E Street webcast entitled “Reverse Mortgage: Rescue or Trap?” that presents a fair, balanced, and informative discussion of this unique loan.
Contrary to most newspaper articles or television segments which try to cover this many faceted loan in two columns or two minutes, AARP dedicates a full 26 minutes to the key questions of consumer protection and avoiding abuses.
The interview style report includes a diverse group of people including two U.S. representatives (one Republican and one Democrat), a reverse mortgage industry insider, a consumer advocate, and a member of the media.
An AARP survey showed that 93% of those who have a reverse mortgage are glad they got one. However, it remains important to ensure older adults are protected when getting this type of loan.
Barney Frank, chairman of House Financial Services, is a “strong supporter of reverse mortgages” and his committee “improved it…(and) did some protection against people being defrauded” as part of the Housing and Economic Recovery Act of 2008.
Peter Bell, president of the National Reverse Mortgage Lenders Association noted that one of the industry’s challenges is that “newcomers coming into the business who don’t always understand the nuances” of the reverse mortgage. It is usually one of these newcomers who use the aggressive marketing or misleading sales tactics mentioned by the media.
Every profession has bad eggs and reverse mortgages are no different. There are unscrupulous lawyers, plumbers, financial advisors (Madoff, anyone?), politicians, teachers, CPAs, police officers, etc.
While no industry is immune to having some unethical salespeople, consumer advocate Suzanna Montezemolo of the Center for Responsible Lending, noted that “in a reverse mortgage...the loan itself often is not the problem.”
Unscrupulous people are the problem. They prey on older adults who are financially strapped and desperate for help. Sometimes convincing seniors to use their reverse mortgage proceeds to buy an annuity or other inappropriate financial product.
Due to the recent decline in the stock market, Mary Beth Franklin, Senior Editor of Kiplinger Financial Magazine, observed that some retirees are “using reverse mortgages as a bridge…for five to ten years until their investments recover”
And her advice to “read all the information out there, look at other alternatives” is wise not matter what you are buying – a reverse mortgage or anything else. “You have to go into this with your eyes wide open”.
With this in mind, AARP’s webcast should be recommended viewing for anyone exploring a reverse mortgage. It can be found at the following link
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