More Reverse Mortgage Scams
Reverse Mortgage Scams August 10th, 2009Consumer Reports Scam
The September 2009 issue of Consumer Reports jumps on the bandwagon with more irresponsible reporting on reverse mortgages. This is sickening. I have now lost all respect for this publication which long ago had a reputation for decency and fairness. Now, some staffer picked up the sensationalism generated by Senator Claire McCaskill D-MO and her committee “looking into reverse mortgage scams on seniors.” We are told, once again, that more regulation is needed. More laws, more papers, more disclosures = more confusion!
A story is told in the article about a senior who did a reverse mortgage to pay medical expenses for his ailing wife – a very worthy use of the funds. Now, he finds he suddenly owes $200,000 on a home valued at about $130,000. Worse, he is about to be evicted from the home because he can’t pay off the $200,000. The implication, of course, is that he has been swindled and his home is about to be taken away from him. Ahh, another senior scammed by a lowly lender!
Unfortuately, the Consumer Reports article is short on detail. This must be the new style of reporting. How much did the couple originally borrow? How long ago did they borrow it ? Why is the homeowner being evicted from his home ? Was this a HECM reverse mortgage – insured by FHA? Or is it some other type of private loan?
Perpetuating the Myth
Next, a TV station somewhere picks up the story and declares that Consumer Reports has deemed that reverse mortgages are a bad idea for seniors. Seniors everywhere are being preyed upon by unscrupulous lenders. Reverse mortgages should never be used – unless you are completely destitute. Soon we will see a host of regional and local newspapers reporting on this same story.
Shame On Them All !
Consumer Reports, the TV station and Senator McCaskill ought to be ashamed! These stories scare away seniors who can benefit from an excellent program. They are completely irresponsible, at best. At worst, they are despicable and serve only to sensationalize a subject that precious few reporters actually understand. If $800 million is budgeted for FHA insurance to provide for POSSIBLE future losses (as is reported by McCaskill and repeated by Consumer Reports) … this information should be balanced by the explanation that reverse mortgage popularity has virtually exploded in the last few years. Of course there might be some losses. (It is, after all, an INSURANCE program by definition. Without FHA insurance no bank would ever lend the money under the HECM program.) But in takes a huge stretch of the imagination to tag this as “the next sub-prime meltdown”. No self-respecting, reasonably intelligent, fair minded individual could believe that.
Author – Robert H. Irving, CSA
Senior Reverse Mortgage Consultant
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