NCLC Report on How Subprime Abuses and Scammers Now Hit Reverse Mortgages

The same subprime mortgage abuses and even the same individual scam artists are showing up in the reverse mortgage market, putting at risk the equity and savings of millions of seniors.  According to NCLC’s Subprime Revisited: How the Rise of the Reverse Mortgage Lending Industry Puts Older Homeowners at Risk (Oct. 2009) (24 pp.), written by Tara Twomey, “well-funded marketing campaigns and perverse incentives to brokers are targeting seniors’ home equity and using reverse mortgages as their tools.”

 

Annual reverse mortgage volume has topped 110,000 units and $17 billion, with top banks like Wells Fargo and Bank of America and large insurance companies like Genworth and MetLife leading the way. Despite a slowdown in originations due to the recession, reverse mortgage originations in 2009 still continue at a record pace.

 

Mortgage brokers see it as a new source of rich fees. Predators who once reaped profits from exotic loans have now focused on wresting more wealth from vulnerable seniors. And securitization, which allowed subprime loan originators to disassociate themselves from the downside risks of abusive lending, is becoming commonplace in the reverse mortgage industry.

 

To see the report on NCLC's website, click here. 

 

Comments

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Mortgage brokers see it as a new source of rich fees. Predators who once reaped profits from exotic loans have now focused on wresting more wealth from vulnerable seniors. And securitization, which allowed subprime loan originators to disassociate themselves from the downside risks of abusive lending, is becoming commonplace in the reverse mortgage industry.

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Hello to all!
Exelente information, it seems to me to be very interesting and I like to receive more information of this topic

Thank you!

Good luck!

[Bill Rowe at Elder-Gateway]

My wife and I are researching reverse mortgages because of forced early retirement with 12.5% unemployment here (more like 25% when you figure in the ones who have given up) and we still owe on our mortgage.

It is essential to do your homework and work with a reputable broker.

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re: Reverse Mortgages - Any way you look at it, the potential pitfalls can be avoided with careful planning, education and informed decision making. - http://www.allrmc.com

[Catherine Drake]

For those of you who have not signed the petition, please take a minute to do so. Please send it to all of your friends, family, colleges, etc. Thanks. There is power in numbers.

PETITION TO THE U.S. GOVERNMENT FROM AMERICAN HOMEOWNERS | Petition2Congress |
__________________
If you are ready to fight for your home, and battle the fraud and injustice served to the American people, send your loansafe.org screen name, state, and email address to: junior.erin@gmail.com or if nothing else please sign these. We need real change!! God bless America, Catherine

PETITION TO THE U.S. GOVERNMENT FROM AMERICAN HOMEOWNERS | Petition2Congress |

Together we can make the difference to help ourselves, and our fellow members. We are organizing for mass action!

[Mike Hansen]

The yield spread premium problem is potentially very large with a reverse mortgage. The investor may
agree to loan $150,000 at 5% which results in interest of $7500/year but the broker/pretender lender could tell the Senior they qualify for $125,000 at 6% which also results in an interest payment of $7500/year. The yield spread premium in this example would be ($150,000-$125,000=$25,000)!
At the closing only $2,500 of this will be reported as a back end commission to the agent. The
other $22,500 will be hidden from the Senior who is
already paying substantial front end fees to get the
loan. By hiding the fact the Senior could have gotten a better loan, the pretender lender is taking
$22,500 off the table which actually belonged to the
Senior citizen. It is essentially equity theft!
In my opinion YSP should be outlawed on Reverse
Mortgages and all fees and commissions should be reported up front. Broker lenders should not be allowed to sell a higher interest rate than the
Senior is entitled to given the market at the time of the loan.

[Cindy]

Thank you for this article. The PDF it links to is more than I think many consumers would wade thru but I know these predators are lurking around my elderly mom's retirement community. Some of her friends have been suckered into reverse mortgages, and based on what she has told me about their lack of knowledge about scams, I feel pretty certain they will regret it. I have sent many articles to my mom about reverse mortgage scams. I just hope she trusts me more than the scammers, because her generation was taught that business people and anyone claiming to be with (or approved by) the govt was absolutely more credible than just some ordinary person. Nothing could be further from the truth today, when we've seen the lending industry devolve into such a crooked mess. How many people will have to get ripped off and lose everything before mainstream media reports what is going on? So many seniors especially are not online and will never see these warnings. And, when their kids try to help them avoid a scam, one of the scammers tactics is to convince the seniors their kids "are just greedy and want the house/money." Believe me the last thing I want is to be saddled with real estate I can't sell. I want my mom to enjoy her last years and if she uses up every cent that's fine. I do NOT want to see her lose everything and spend what's left of her life fretting over it.