Applauding Advancements In Reverse Mortgage Loans
Recently there was report, introduced to the public by the National Consumer Law Center, titled "Subprime Revisited: How the Reverse Mortgage Industry Puts Older Homeowners at Risk." Not surprisingly, this report has gathered a lot of attention and has given the naysayers of them fuel to continue reporting on only the negative aspects of a product that, for some, can be a life saver.
Most mortgage products available in the United States today are not inherently good or bad, but rather serve specific purposes to help particular groups of people. This is very true for the reverse mortgages made available to people 62 and over with sufficient equity in their home. Many people fail to note that safeguards have increased for federally insured reverse mortgage loans and the proprietary market has dwindled significantly because it does not feature the same safeguards. A great deal of the abuses in the report have already been regulated and should no longer be considered negative aspects of the reverse mortgage market.
Some things which many uninformed reporters choose to constantly scrutinize are the "sales tactics" of reverse mortgage loan providers, shared equity mortgages, and using the product to pay for annuities and long term insurance. Federally insured reverse mortgages do not allow for shared appreciation agreements or product bundling. Although a person can choose to purchase an annuity with his or her proceeds, it is specifically discouraged in the disclosures that are provided to the applicant.
The "high fees" that many authors choose to harp on as predatory lending are strictly limited by the federal government. The highest fee that can be charged is the one that goes to the FHA to insure the loan. This insurance protects the homeowner from owing more than the fair market value of their home, which is an advantage of a federally insured reverse mortgage.
Similar to all other products, financial or otherwise, deceitful people will try to turn a product that can be very useful for some into something that allows them to take advantage of others. To keep these occurrences as an absolute minimum, HUD is continually finding ways to improve the consumer safeguards on this product.
There are advances made daily in order to improve the federally insured reverse mortgage program. Recently, HUD found the third-party counseling adequate and reverse mortgage counselors were given several million dollars to aid in training in order to ensure that people are getting all the information necessary to make an accurate decision. These protections will continue to increase so that people over the age of 62 will be able to use this product and feel safe at the same time.
Although there are always going to be professionals who look for people to take advantage of, this is the exception, not the rule.
by: Anne Johnson