Something to look out for:
…as the industry grows, some see eerie parallels to the subprime mess roiling the country. Could reverse loans become the mortgage scandal of the next decade?
Complaints include misleading marketing tactics and, worse, pressure to buy inappropriate investment or insurance products with the proceeds of the loan. “People can end up in predatory situations,” says Barbara Stucki, a home-equity expert at the National Council on Aging.
Peter Bell, president of the National Reverse Mortgage Lenders Association, says the bad actors are fringe players, not the headliners of the industry. “We’re seeing some of the subprime players coming into our market,” he says. His group is investigating direct-mail pieces that look like official government notices but are actually just loan pitches, and others that promise huge commissions for salespeople who bundle annuities with reverse loans.
A study recently released by AARP finds that nearly one in ten reverse-loan borrowers had other financial products recommended to them by lenders — usually investments, annuities or long-term-care insurance.
I don’t see this becoming a mortgage crisis but I do think that people need to approach these products with caution, especially if the salesperson is trying to push other products.
I’ll admit that I don’t know everything there is to know about reverse mortgages. I have read some things on the internet as well as some articles in various magazines. I will say that the product could make sense for some people. But, one thing that troubles me is that I haven’t been able to find any examples of how these products work in the real world. In other words, I want to see the math before I weigh in with my opinion.
Oh, and if you’re interested, while researching reverse mortgages, I put together a list of resources in del.icio.us (del.icio.us/JLtheP/reverse_mortgages). I’ll add to that list as I find more resources.