Banksters attack elderly with reverse mortgage scam

[Joanne98]

June 8 (Bloomberg) -- Comptroller of the Currency John Dugan said a type of mortgage sold to older homeowners may pose the same risk as subprime loans, and that his agency was slow to act as rising foreclosures led the market to collapse.

“We all could have sounded the alarm earlier about risks that were developing in the subprime mortgage market,” Dugan said at an industry conference in Orlando, Florida, as he raised concerns about so-called reverse mortgages. “It is imperative that our consumer protection standards be robust.”

Congress stepped up efforts to curb predatory lending practices and halt foreclosures after the subprime mortgage market collapse in 2007. Lawmakers passed a $700 billion package that was signed into law in October and sought to shore up the financial system and halt the record pace of foreclosures.

“While reverse mortgages can provide real benefits, they also have some of the same characteristics as the riskiest types of subprime mortgages - and that should set off alarm bells,” Dugan said at the American Bankers Association conference on compliance issues. “Now is the time to get out in front of this issue - before real problems develop.”

A combination of job losses, lower pension benefits and declining values in retirement accounts will increase demand for reverse mortgages as homeowners older than 62 seek to increase their income by using the equity in their homes, he said. The loans are often attractive to lenders because insurance from the Federal Housing Administration limits their losses, he said.

Guidelines

Dugan said OCC will release guidelines on reverse mortgages, which let a homeowner borrow without having to make payments until they die, sell the home or fail to pay taxes. Regulators should establish more rules for borrowers and lenders, including requiring escrows for taxes on reverse mortgages, he said.

Risks that contributed to the collapse of the subprime- mortgage market also are a concern in the sale of reverse mortgages, Dugan said. Complex lending products have the potential to result in “skewed incentives” for servicers that are underwriting reverse mortgages, and the product is “fraught with consumer compliance concerns,” he said.

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http://www.bloomberg.com/apps/news?pid=20601213&sid=awPlC3t65GTk

[imdjh]

1. Reverse mortgages have been a scam from the start, and Robert Wagner is a piece of shit. nt

[salvorhardin]

5. I don't know about that

Scam seems unduly harsh. Some reverse mortgage lenders may be scamming people, but I wouldn't call reverse mortgages in general a scam.

A reverse mortgage allowed an elderly friend of mine to stay in his home for the last few years of his life. He was pretty much destitute, couldn't pay his property taxes, utility bills and was living without water because he didn't have the money to get the well pump fixed. This was the family home he grew up in, and loved very much. He had no children or other family left alive and would have ended up in a county nursing home where he probably would have died within a few months from the heartache alone. That house, and his beloved kitties were all he had left in the world.

However, a reverse mortgage meant he could make the necessary repairs to his home, make it handicapped accessible, pay his back taxes and continue living there in dignity for almost a decade until his death. Of course, when I helped him get the reverse mortgage I made sure he went with a reputable lender, taxes were held in escrow and utility payments deducted automatically from the account every month.

[Franzia]

6. I agree. First name I thought of when I read this article.

A now-Z-list actor who has done nothing of note for the past 30 years has become a mouthpiece for the reverse mortgage predators. "Number Two", indeed.

[On the Road]

2. How is a Reverse Mortgage a Scam?

For most retirees, their house is their most valuable form of savings for retirement. It's a way to using that equity for its originally intended purpose while still using the house as a residence. Pensions have dried up, and Social Security isn't enough for most retirees.

[dipsydoodle]

4. Depends

on exactly how its sold.

[imdjh]

7. I call it a scam because of the cost of the credit.

The reverse mortgages that I have seen have obscene origination costs.

[On the Road]

8. Ah, OK

but so do some other kinds of mortgages. I would agree that the terms and conditions might be usorious, but the concept seems perfectly good if properly regulated.

[dipsydoodle]

3. This has been going on in the UK for some years now

Group name is home equity release. UK Gov guidelines here : http://www.moneymadeclear.fsa.gov.uk/products/equity_release/equity_release.html

May suit some but not all. Biggest scam is where the house is effectivey sold with the owner staying in situ to rent it. Rent then gets jacked up.

Maybe suited to those with no dependants or children , grandchildren, whatever to leave their money to - you can't take it with you !