According to a recent report from the Consumer Financial Protection Bureau (CFPB), a large portion of complaints received by the Bureau involve Reverse Mortgages. The seriousness of this is exacerbated considering Reverse Mortgages comprise only about two percent of the overall mortgage market!
The most frequent complaint reported involves consumers who are confused about the requirements and terms of reverse mortgages. Many are frustrated when they are unable to refinance their loans because there is insufficient remaining equity in their homes. The CFPB reports these complaints suggest that some homeowners may not understand that the loan proceeds as well as the accrued interest on the loan, over time, will substantially decrease the amount of available equity.
“Consumer complaints tell us that the complex terms of reverse mortgages continue to be misunderstood,” said CFPB Director Richard Cordray. “As more baby boomers choose reverse mortgages to tap into their home equity, they need to understand the unique terms and features of this product. Our advisory can help those who have already chosen reverse mortgages to plan ahead for loved ones.”
Unfortunately, the CFPB continues to ignore
what I believe is the Number One Cause for most borrower complaints.
Where do most senior citizens obtain their information about reverse mortgages?
If they’re lucky, a trusted advisor such as their financial advisor or CPA. If they’re NOT so lucky, they may react to an advertisement received in the mail. Or they may see Henry Winkler, Robert Wagner, or Fred Thompson on TV.
They then call one of these “boiler-room” lenders and they speak to (gasp!) a salesperson.
How many of these smooth-talking salespeople are interested in the borrower’s long-term financial well-being? How many are more interested in earning a commission?
Reverse Mortgages AND Forward Mortgages are financial instruments, as are insurance and investment vehicles. They have appropriate uses and inappropriate uses. A Reverse Mortgage is a wonderful tool and can be a life saver for some seniors. But they are not appropriate for everyone.
So what should a senior citizen do to ensure they’re making the right choice?
Obtain a referral from a trusted advisor. Then drop the slick salespeople and trust a licensed and Certified Mortgage Planning Specialist® to explain the pros and cons and help you determine whether a Reverse Mortgage is right for you.
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.
This material is not from HUD or FHA,
and has not been approved by HUD or a government agency.