Reverse Mortgage

Is the reverse mortgage the next scam created by bankers to steal from the unsuspecting elderly Americans?  It appears that in addition to a very large fee, the reverse mortgage also involves increased interest rates that far exceed the rates of either a conventional mortgage or a home equity loan.  Advertisements claim the reverse mortgage will provide a homeowner 62 years old or older with “tax free income”.  Of course, what the ads do not say is the reverse mortgage is nothing more than a loan against the equity in one’s home and that funds that result from borrowing are never subject to income tax.  The country has experienced a sea of foreclosures that are the result of the banking industry convincing may gullible homeowners to use the equity they built up in their residences as an ATM with home equity financing or re-financing.  Exaggerated values resulted in many homeowners becoming under water and owing more than the worth of their property.  The banking/finance industry profited and it looks like the advertising for reverse mortgages are nothing more than a replay of the type of activity that results in banks and finance companies profiting at he expense of naïve consumers. Concerns about the multimillion-dollar reverse mortgage market echo those raised in the lead-up to the financial crisis when consumers were marketed loans — often carrying hidden risks — that they could not afford.“There are many of the same red flags, including explosive growth and the fact that these loans are often peddled aggressively without regard to suitability,” said Lori Swanson, the Minnesota attorney general, who is working on reforming the reverse mortgage market. Brokers earn higher fees on these loans and even more money when they sell the loans into the secondary market, where they can get rates nearly double those for variable loans, according to rate sheets obtained by the consumer bureau.  Some 70 percent of reverse mortgages are taken in lump sums, up from 3 percent in 2008, according to the bureau. When seniors use the money to pay off other debts, especially right before retirement or early into it, that can leave them with scarce resources to pay their property taxes and insurance. If there is any way to screw a naive public you can be certain that the banking industry will find a way to exploit the marketplace in order to make a profit. The sub-prime went into the toilet so now Wall Street and the banks will turn to the elderly.