Beware the reverse-mortgage ripoff

I spent 15 years in the mortgage
business, when I turned 62 I got
a reverse mortgage and it was
the smartest thing I ever did.
God Bless America. I also get VA
medical benefits. This country is
the best there is.No stinking politician
should ever apologize for America.

I don't doubt that a majority of people with reverse mortgages are better off because of them, but based on the comments, there are a lot of people in the reverse mortgage business who are worried about their line of work. My guess is that some reverse mortgage lender or group coordinated their associates to all leave comments on this subject. Notice their similarities (the key here is word choice). The funny thing is that by repeating the same things in the same way often enough can eventually convince people that it's the truth.

These very similarly written comments remind me of the coordination to fight universal health care. I love how they try to make it seem like these right-wing protesters "spontaneously" appeared at the same place at the same time to rally against public health care options (without coordination, coaxing, or money changing hands). I simply don't buy it. People with a half set of teeth who have Confederate flags on the back of their 20 year old rust-bucket pick-up trucks don't have a huge interest in defending health care insurers' profits. Wake up, people.

So some one tell me what is the other end of this reverse mortgage stick? What happens when they can no longer live alone? They still have no money, the house is small and old and no one is buying. They can't get Medicaid because they "own" a home. So now they are REALLY stuck! Loan will come due if she moves out and there is no way to pay it back. What do we do now???

A reverse mortgage is simply a Home Equity Loan for senior homeowners [with some very special benefits].

Since less than 2% of eligible homeowners have ever participated in the program, it is so easy for false information to be passed along as truths. Noise is not truth just because it is heard loudest in a small group. But, consider this…urban legends abound on almost every subject and most all are simply inaccurate.

Let's consider these points:

(a) Big fees not true. The fees are always less than what it would cost to sell the home. Where are the headlines that scream about the fees that the Realtor charges to take a sales order? Even experienced Realtors will agree that the actual cost to sell a home reaches somewhere above 10% total costs. Add up the seller concessions at settlement, the real estate commission, the costs of moving which include the labor, the truck, the new utility deposits, and more. To sell a $400,000 home will cost around $40,000 in fees. A Reverse mortgage on the same house will cost less than $20,000. Think of it this way…a reverse mortgage is a way for a homeowner to, in a sense, sell the home to themselves. They get some of their profit in hand, ie., equity, and they get to keep the home, too. Let's stop yelling nonsense and start thinking a bit.

(b) All Loan Officers are not scum. Stop it already! Sure, there are criminals out there and they should rot in jail. But, there are plenty of decent, honest, compassionate, experienced, and caring people who love what they do and enjoy a quality of life that comes from the joy of helping elder clients consider positive ways to work out their financial issues and solutions under the guidance of professional assistance.

(c) The "news" is partial. Let's be reasonable here. Do you believe everything you read? Do you believe that every journalist actually researches all the points of their written article? If you look at most negative stories in the press, they are almost always the same story – "Miss Jones gets Reverse Mortgage, Loses Everything". Turns out that the criminal got her to get the loan so that he/she could invest her funds in the excellent opportunity for frog-leg futures. And, true, everything was lost. But, that was a criminal act…no different from painting driveways black. Be realistic, here. That was not the fault of the reverse mortgage. That was a criminal act and is no more the fault of the reverse mortgage financial product than you would place the blame for someone losing their savings in Las Vegas after taking out a regular loan from, say, Bank of America. It is not the fault of the source of funds but, rather, the fault of a criminal act combined, perhaps, with faulty reasoning.

(d) Ask the good people who have actually benefited from the power of a reverse mortgage. Please, talk to the ones who actually know the facts. Call a lender. Ask to speak to a client.

(e) Researchers estimate that nearly 78% of all older adult households do not have sufficient resources to sustain them through their retirement years. This fact and other truths can be found in the detailed research document just released by MetLife and the National Council on Aging. You can read it at http://seniorlifestylemortgage.com/pdf/tappingequity.pdf

My view is that it is time to put the reverse mortgage bashing to rest and to accept the reality that this federally insured lending program has incredible benefits. A Reverse Mortgage is a valid, well-designed financial tool that solves problems in a safe and secure manner. You, too, may seek its benefits at the appropriate time.

And, besides, the product has an incorrect name. No one actually "reverses" anymore. That's what the borrowers did when they wanted to convert equity into a monthly proceeds stream. Now, almost everyone prefers the funds to remain in an always accessible credit line. That is why I prefer to call it a Senior Lifestyle Equity Loan.

~

Many 'financial products' (including reverse mortgages) are too complicated to be understood by normal people. Whether or not they are designed to be so confusing is a debate subject.

In fact, many of the people MARKETING and SELLING 'financial products' (including all types of mortgages) do not even understand their own products. They usually have very little product training. They're just trying to capture fees, and mortgages are usually laden with fees.

So, the buyer must beware. If the agent cannot explain the deal in plain english or you can't extract the terms of the deal from the paperwork, you must either get up and walk out of their office or kick them out of your home immediately. There are literally thousands of people and companies hawking mortgages, so you'll always have other options.

But, once you sign the deal, they'll try to enforce it, so make sure it's what you really want: you're stuck with it.

This is sensationalism trying to pass as journalism. I researched reverse mortgages for a year before my bank offered them. We educate seniors constantly that the product isn't for everyone, show the alternatives (often as costly), urge them to bring in their accountants or family members to make the decision. Most adult children do not want the home, and care that they parents want to fend for themselves without asking for handouts from the kids. If there's money after the parents pass, great, if not, it wasn't the kids money to begin with-the parents used their equity to support themselves. Heck, many of their kids did that-use the house as a piggybank to take out equity to support a lifestyle beyond their means. When values no longer grew, that's what brought down the housing industry. Who cannot understand the basic concept that HUD/FHA charges 2% to insure the loan to the lender. The lender has taken on the risk of people who often have credit scores that wouldn't get them a loan (even a line of credit, which, by the way, still must be paid. Many who did that have found lenders freezing the line or cutting it in half due to the drop in value-how are they to pay for their medication then?), little by way of assets or cash flow to make a payment, assure growth in the line of credit, and, oh, by the way, not know when they are ever getting repaid. The insurance is there to protect the borrower also in case the lender defaults-HUD will step in to make sure the payments are made to the borrowers. That wouldn't happen if you lose your investments in the stock market or if your mutual fund takes a hit. There is a term to the loan-when the borrowers are 150! Would you lend that much money, even to your best friend when the repayment is at an indefinite time down the road? The costs of the mortgage are the same as any other, only lenders can't build the costs into the rate as "no points, no closing costs" mortgage, but the costs can come out of the closing funds, along with the insurance, which is why the initial draw is so high. Do you think most seniors want to sell their home? Many would have to make improvements just to make it marketable, pay the real estate commission (5-6%) and still find replacement housing. How much to pay the movers, first and last month's rent, plus security deposit. Move into senior housing? Can be on a waiting list for years, and by the way, may have to give the proceeds of their home away in order to qualify to get in as low income.
The independent, HUD-approved counseling must be obtained prior to the processing of an application, so how is it the author is blaming loan officers for seniors making a reverse mortgage a choice that works for them, and not for the borrower who doesn't have to make a mortgage payment? HUD is making more on the deal than anyone else involved. I have seen such a positive effect on the overall well-being of seniors after taking a reverse mortgage, and we receive many thank-you cards and calls. Why do so many people think that Medicare/Senior Welfare is the answer? There is such a movement to keep assets away from the Government's eyes in order to get the nursing home paid for. Who do you think is paying? And wouldn't you rather be in your own comfortable home, even if you had to pay for nursing assistance than to be warehoused in a nursing home? And what makes people think that someone 62+ has suddenly lost all their brains and are "victimized". Many make much smarter financial decisions than their children or grandchildren, so give them credit for doing the right thing. If there are problematic loan officers, get them out, but don't throw out a HUD program that's been proven since 1989 because 3% are not "totally satisfied". The program promises that a mortgage payment does not have to be made while at least one borrower lives in the home, or there is not a break in residency for more than 12 consecutive mos. Taxes, insurance and maintenance are required to be taken care of, just like the terms of any other mortgage. If you don't pay taxes, the municipality has a lien they can act on. There are many, many pages of disclosures, none of it is hidden, and, as in any other primary residence refinance, the borrowers may rescind the transaction within 3 business days. Many states also have a waiting period after the loan is approved and a commitment letter sent as a cooling off period, so there is no rush to closing. Many of the seniors we educate come back to us years after we first see them, when the time is right for them. Increasingly, we're seeing that they no longer own the home free and clear, about half currently have a first mortgage and the squeeze to make those payments is crushing them. They are joyous to get rid of that burden. When working on various scenarios for them, it is discouraging to know many have not been eating correctly or taking the correct dosage of medication in order to get by. Please consider these people before painting the product as evil. It is not for everyone, but can bring great financial and emotional peace of mind to those who have no other vehicle to help them.

Thanks for your concern about Reverse Mortgages. My experience has been very confusing. Im 62 years old, retired and have been researching rev mortg for about 2 years. Ive talked to many people and have been given conflicting information. I live in a manufactured home, and ive been told no they dont qualify and yes they do. Ive been told a concrete foundation is required, ive been told its not. I had a foundation expert look at my foundation and he said its going to cost from $5,000 to $8,000 to bring the foundation up to code. Ive been told by another inspector that on an existing man home you dont have to comply to all the same regulations if your home is new. This last inspector said I would not need any foundation repair and I could start the loan without any repair costs to me. Also I had a real concern about when the loan becomes due and payable what would my heirs owe if they chose to live in the home after my death. My question was, would they owe the loan balance or just the appraisal value and I was assured by a bank loan officer that they would only owe the appraisal value. Later found out thats not true, if they continue to live in home they will owe the loan balance. Also I had a concern about what happens if I go into a nursing home, and was told by the same loan officer, she didnt really know but thought my heirs would be okay and not have to repay the loan at this time. Again I found out thats not true. The loan becomes due when you are confined to a nursing home for 12 months or longer. I continued to do research and thought I had all the answers, and decided to go ahead and take out a loan application to get the loan. I started by doing the required counseling, and once again had more questions than answers. The session was not to my satisfication and when he sent me my copy to be signed and sent to the bank, I was so confused about what he stated that was discussed, I could not sign the form and did not sent it back. A few days later the bank sent me a packet of documents to sign and return. Theres about 50 pages of documents, with very confusing language which I dont understand, and I would need to get a lawyer to go over every page line by line. Ive now decided not to do the Reverse Mortgage. I feel ive been deceived by people who need to all get on the same page. I cant imagine anyone would sign loan papers that are so confusing. Its not simple like you hear on TV and all the ads. Its the most confusing procedure Ive ever seen. Ive worked in banking for 30 years where I processed paper work for regular mortgage loans, and am somewhat familiar with documents that are signed by the customer but I have never seen anything to compare to the Rev Mortg procedure. Thanks again,

Very typical, uninformed article by someone who never actually discussed a reverse mortgage with someone who has one. Here's an idea…if you're looking for seniors who don't like their reverse mortgages, contact AARP. They did a survey in 2006 which showed that 97% of respondent said that the RM had a positive affect on their lives. You can ask to talk to the 3% who didn't like the RM and write another story making the 3% group sound like the majority. Don't forget to leave out the 97% group…it will kill the enflamatory nature of the story.

The critics of the article obviously do not work in the financial industry or work with retirees. I work in a bank and have for over 7 years near Sun City, a huge retirement community here in Arizona. I have seen dozens of retirees bring me their signed or soon to be signed reverse mortgage paperwork and I am SHOCKED that anyone would take out these types of financial products. Most have initial fees starting at $10K to $15K. and it gets worse from there. Do not believe the other posters on this article. The elderly are getting shafted by these products.

Thank you for this interesting article. I am 65 years old and own my home. Although I do not plan for a reverse mortgage. I am glad for the opportunity to go to appropriate web sies for information.

This article is very sensationalist. Reverse Mortgages are not all bad and they make sense for a lot of clients. I meet with people all the time and when we can't refi them traditionally, the only option is to sell the house if it has equity in it. However many time a senior is not looking to pick up and move, they want to stay right where they are until they die. This is when a reverse mortgage makes sense. Obvioulsy shady characters exist in every business, if you are not careful you can get taken for a ride any time any where anyone is selling you a product. Make sure the lender and broker are licensed, use references!!!!! What ever happened to doing your homework?? SO MANY times I deal with clients that have been abused and I ask them what happen and 99.9% of the time it was a by someone they didn't know and met through mail or the internet. Go local, and ask for references, call them up, do your homework. If someone has worked their whole career th right way and has references you have checked up on, then go with them. You do that for a babysitter why wouldn't you do that for a big time purchase or financial decision? If you meet someone through the mail or internet BE EXTRA CAREFUL, check out the company and the agent against any state web sites you can for their business record.

Donna Rosato did not do her research when writing this article and it was irresponsible to publish it.

the reverse mortgage is not the problem…….but the broker that pushes these things on the homeowner always wants to "SELL" some off the wall financial product that the homeowner does not need and is usually a great bg ripoff!

I have a reverse mortgage horror story, Don't ever get one if it is for a divorce to buy the other person out, My husband did this and we lived over 30 years in our home, I signed off the deed but never got my share of the equity, they deposited it all in his account, Then besides over $10,000. in fees to make the loan, a year later before the divorce was final, he got sick and died, All of a sudden I had half the income, all the bills, and now they are going to foreclose on the only home I have had in over 30 years, They are rude to me and there is no way I can refinance because of income etc, We were married over 40 years, and after all that, I am the one who loses all the way around, Not only am I sitting here with bills, half the income, but soon to be homeless, I could have been on this loan except we were getting divorced and the court ordered him to pay me my half of the equity. I signed off the deed in front of the loan people and they had talked with the attorneys and knew what I was supposed to recieve, and they never gave me a dime, and say this isn't their problem. So now he is dead, I am in this mess, and they are about to start foreclosue, This is horrible how they collect interest all the years you pay on your home, then you get old, and they make one of these loans, and in the end they get your home after all, unless the kids can pay it off, I think it is a real sneaky way to get everything someone works for all their life, and they don't even blink an eye in my situatiion, These should be outlawed. Everyone I have asked seems to think I am just out of luck even tho they stole my equity. We were married over 40 years and I have nothing!!!

I must say that I am shocked by what appears to be the author's lack of knowledge on how the Reverse Mortgage program works. My father in-law who will lose his disability benefits in 2 yrs has basically assured himself that he will never have to worry about keeping a roof over his head. At his age and in his health he has enough to worry about. Lets face it, every mortgage option comes with fees and quite honestly if you look at the fees associated with a Reverse Mtg the excessive figures are not arbitrary amounts that are added on by the brokers, these are fees regulated by FHA for mortgage insurance and closing costs – the brokers are tightly regulated on what they can charge. In the current declining housing market I am thankful that my father in-law finally listened to us instead of the negative press coverage and moved forward with his HECM – had he only done so a year earlier he would have rcvd a much larger amount of money. We are not concerned about what happens with the house when he dies, if there is some value left in it then great we will have something to put towards the kids college funds but at least for now we know that he does not have to struggle with a monthly mortgage payment and we no longer have to stress about how we are going to be able to help him make up the shortfall

The FTC reported that they had 4,000,000 complaints last year about financial products. Their official records show that 50 of those 4 million complaints were about reverse mortgages. I wonder what the other 3,999,950 were about?

This article is ridiculous. It's horrible. Let's say the author or any one else for that matter had some money to lend as a mortgage. So we negotiate the details which include the fact that I don't want to make any monthly payments, I don't want to have to pay her back until I either die or sell the home, I want a credit line that will grow over time, I want her to guarantee that I nor my heirs can ever be personally responsible to repay the loan and that my home can not be foreclosed on as long as I pay taxes and insurance premiums, I want a guarantee that if she can't make good on my line of credit that an agency of the US Government will step in and make the payments, and she can't lower my credit line if my home falls in value. Oh, I almost forgot, I have lousy credit and very little income, I want a low fixed interest rate and I want to be able to pre pay with no cost to me. Of course she would never agree to my demands. Who would? The only way to have these conditions met is to do a reverse mortgage. What is she whinning about?

To paraphrase "reporter" Donna Rosato: "If you are considering taking out a reverse mortgage or have a parent or family member who is, don’t fall for a pitch from a [cable news writer who does sloppy and biased reporting and] who cares more about a lucrative [salary and benefits] than determining whether a reverse mortgage makes sense for you."

I helped my sisterinlaw get a reverse mortgage. She had a farm home loan and had enough equity to get out of it and now has no house payment. She was workin 3 jobs to get by before and now can live out her years much more comfortable. Her son however will have to pay off the loan if he wants the house when she passes–same as if she kept the farm home mortgage and made payment for another 12 years!! I will do a reverse mortgage as I have no one to leave my (paid for) house and I could use the cash

Show this article to the senior that is 3 months down on their mortgage, has a negative cash flow, and rising medical bills and show me a better option to keep them in their home, create a postive cash flow in most cases and pay off some of the medical bills. The costs of a HECM are high? Sure they are. It is not the 2 points making the costs so high, it is all of the costs. Every broker out there is selling regular FHA loans at 2 pts plus in ysp and upfront. Why should this loan be any different. And for this two points, half the time I have to make several trips to a customers home which is part of the service I offer when doing these loans. Seniors dont want to drive places, they dont have their trusts in convienent locations when you come to their house, most dont have fax machines to fax stuff, and all of the seniors I have delt with have liked the extra hand holding through the process. I never recommend buying other products with the proceeds. I am there to provide a solution to keep them in their home, get some cash for any needs, and reduce their monthly expenses. Anything else is left to a financial planner.

I come back to CNN every so often and then realize why I left.

In a country where many people have simply not saved for their retirement and the only asset available to them is their home, what's wrong if they use it. For many people, it is a better product than home equity since these seniors may not have the money to make monthly payments or may not even have the income to qualify for it.

For Bob S who thinks it is his privilege to protect his parents from such 'snakes', it is more likely that he is trying to protect his own inheritance.

If the primary mode of saving for a person was their monthly mortgage payment and they are able to leverage this investment while still enjoying the benefit of the house life long, it seems like an option that they should certainly be allowed to explore.

Donna, you continuously slam financial products and bankers for charging fees. Do remember that in many countries across the world people do not have access to bank accounts let alone easy credit. In US, most people can have access due to a robust private sector banking industry that for the most part has continued to be profitable.

I've been in the mortgage industry for 25 years. I have seen first hand how a reverse mortgage can be a godsend for many financially straped seniors. This article was poorly researched and is a disservice to the senior community. If more people understood the product and who its designed for, we wouldn't have negative articles and comments like I see posted here. If you have a parent that you care about who maybe getting into financial trouble I urge you to learn about and understand what a reverse mortgage can do for them.

Reverse Mortgage was a life saver… while the banks were tightening their lending practices, my parents were turned down from just about every loan options out there. Their home would have foreclosed if it weren't for the reverse mortgage offering loan, despite their low retirement income.

My mother couldn't make her mortgage payments anymore on her fixed income. I got her to do a Reverse Mortgage and even though ultimately I know she will end up spending the equity in the house, I also know that she can't be kicked out of it until she moves into a care facility. So essentially, the reverse bought her more time living independently which is what she wants most in the world. For some people it is the right choice.

"YET the number of people getting reverse mortgages keeps rising. Even as home values are falling (leaving seniors with less equity to tap), more than 112,000 reverse mortgage loans were made in 2008, up from about 22,000 in 2003, according to the National Reverse Mortgage Lenders Association. Monthly reverse mortgage loan volume is setting records too, with nearly 9,000 reverse mortgages made in May"

That paragraph says it all! If it is such a bad program then why have they skyrocketed!!!! Some might say they have skyrocketed due to desperate people in desperate situations. Maybe!

My biggest rub about articles like these is the reference to both high costs and the cross selling of other financial products. First, the high cost issue only arises because the fees are so visibly disclosed, which is good. Are they high? Relative to what? A Happy Meal? Maybe, but vs having no money, the cost is relative. Another perspective on costs would be the costs associated with mutual funds, annuities or managed money. A $10-$15k upfront fee is a pittance to a $200k deposit into a MF or annuity held for 20-30 yrs.
The other issue is in reference to cross selling other financial products is, THE one financial product and THE most responsible utilization of the RM proceeds is to buy LONG TERM CARE INSURANCE!!!!
With the changes taking place in Medicaid/Medicare/SS, your house will be the financing vehicle for a LTC stay or service, unless you have the cash to pay for it. If you have the cash, most likely that means you are smart enough and have probably put the burden of your care on an insurance company anyway….
The house is a leveragable, tangible asset. Use it and the power it represents!

D.Wilson

Just like in any business there are always unscrupulous people…In my experience writing these loans–the clients have independant counselling prior to and usually the whole family is involved and are advocates for the senior family member–as in any mortgage product consumers can choose to make wise or stupid decisions on how they use the money or the product they pick–thats why consumers should look for Mortgage Advisors and not SALES people!!! A good advisor will find out their needs and align them with the best product for their goals and not just sell them a product based on commissions. There was an article in our local paper not to long ago about the BAD BAD reverse mortgages where the home was being foreclosed on–it was barely noted that the person who received the reverse mortgage got over 300k and spent it on 2 reverse mortgages–the first one and a refi to get more money!!! No mention of what it would have cost the family for dads care all those years–just that it was a disgrace that the home was being foreclosed on–the dark side of reverse mortgages–its a contract!! you signed up for it!!! you got the money!!! Not every product is right for everyone.

I think it is important to realize that one should never take advice from a commissioned salesperson (especially in regards to financial products) as their interests and their clients’ interests are not in line and that creates a conflict of interest. The salesperson gets paid a commission so they are incented to sell as many products with as high of commissions as possible. Annuities specifically can be very expensive depending on the options in the product. The moral is that before talking to a salesperson about either of these as an option one should get an independent financial professional to evaluate your situation and see what you actually need. There are often less expensive options available for many people.

Like any other financial product, there are appropriate and inappropriate situations in which it should be used. There are ethical and unethical sellers of this product just like any other. For a senior citizen who has no other source of income, I can see how a carefully researched and vetted reverse mortgage could be a very good thing. Let the buyer beware and make a careful, non-pressured decision, just like you would with any other financial product you buy. To paint an entire industry as "bad" is irresponsible journalism Donna.

Quick- you mean to tell us you were making a killing selling option arms, AND reverse mortgages? Wow- how many hours in the day did you have to work with? Your option arm argument can never be proved, but every reverse you wrote is a matter of public record. Put your money where your mouth is and share with us who you were with, and where you were working? Whats that? You cant remember? Right! This is typical of each and every opponent of reverse mortgages…they can't back up what they say with facts!

Dearest consumer, think for yourself.

Why would FHA be involved with something as inherently "bad" as this program is purported to be?
make no mistake, it is not called "the free-lunch" program, it's a loan. It also happens to be the only game in town if you want to stay in your home, not have to make loan payments, not have to downsize, and not have to rely on your underperforming children or financial planner to explain why your standard of living keeps going down.
You bought your house. You made a smart investment. Anyone who tells you it is unwise to take as much advantage of your smart investment as possible has probably not accomplished much in their own lives, and is bitter that you have a chance to take a second bite of the apple.

To the naysayers; the genie is out of the bottle on this one. look at how many other countries are using the same system to foster financial self-reliance. The game has changed forever.

What will be the catalyst to shift public opinion on this issue?

What I'd like to know is why are we assuming that all seniors are vulnerable and are unable to distinguish a good offer from bad. Are these the same people that ran our great country? Apparently, the moment I turn 62, I will need my "honest" polititian to protect me from these products.

I am also sick & tired of the beating on the banking industry. Apparently, except for banks all other industries are not in the business of making a large profit? Not trying to make us buy what we don't need or can't afford? How about on site counseling before we sign a purchase contract for a new car? How about a used one?

Enough already!

Oh, and to David in Mesa, AZ.

I agree. As a child, it is my PRIVILEGE to help take care of my parents as they grow older. And that includes protecting them from snakes, sycophants, flatterers and ghouls like these reverse mortgage brokers are!

Obviously, some of you people are IDIOTS! You have NO idea how insidiously BAD this idea is. You ruin not only YOUR financial well-being, but also that of your children.

One thing that has not been mentioned in the article or by other posters is the use of a reverse mortgage to purchase property. My monther is using on because she has assets to put down on her new home, but does not have the income to support a traditional mortgage. Because she is essentially living off of SS income, a reverse mtg is perfect because it allows her to put down around 60% of the purchase price and never have any morgage payments for as long as she lives there. For someone on a limited fixed income who has money to put down, it is the difference between her being able to buy her home and renting it until her money runs out.

The title of your article suggest that all Reverse Mortgages are bad and the lenders that originate them are bad people. The fact is a reverse mortgage can be a wonderful financial tool for a senior and most of the lenders originating them are honest, ethical people. While a reverse mortgage may not always be the best option, for many seniors, it is the only option if they wish to stay in their home and lack the cash flow to do so. Just like any other financial services product due diligence is reqiured. This is why all Senoirs who consider a legitimate Reverse Mortgage must go through counseling. To blanket all Reverse Mortgages as bad and all lenders who originate them as bad is an ignorant and unfair statement.

This is the epitome of irresponsible journalism. There are a vast number of satisfied reverse mortgage borrowers who view the reverse mortgage as a life-changing option enabling them to age in place.

As a frequent viewer and reader of CNN, I am beyond disappointed at this one-sided, inaccurate coverage that does their readership a tremendous disservice.

As a 17 year reverse mortgage industry veteran I am saddened when I think of the multitudes of senior homeowners in dire financial circumstances who will no longer view a reverse mortgage as a viable option to help fund their retirement years.

This is typical media garbage. It shows you do not understand the product nor care to understand it. At the end of the article you are asking for negative comments, but why not positive? Try to get the whole story.

Another example of the media emphasizing the negative to sell news and expounding on a topic with no idea of the facts or the reverse process. Have you ever though of interviewing people who understand these products before blurting out so much negative banter?
A reverse is a financial tool worth examing and understanding. They are not right for everyone, but for many they are a God send that relieves incredible amounts of stress and allows them to remaincomfortable in the familar souroundings of their home.

A comment on long-term care insurance since it has been intertwined here.

Some folks have complained that Ms. Rosato should not be advocating skipping out on LTC insurance (she has not actually said this really). The reality is that LTC insurance is not for everyone. LTC insurance only makes sense if your savings are substantial enough that you are certain you will be able to make the payments for your whole life. For many people this is not the case and the LTC insurance ends up sapping their quality of life and then not being there when they actually need it.

Donna,

I was a Loan Originator for 5 years during the boom and made a ton of cash off of Option Arms and Reverse Mortgages, All of these people slamming you are obviously tied to the industry and are trying to hold on to thier very last slice of bread and butter. Reverse mortgages are one of the biggest legal scams left besides buying expensive life insurance and selling it to a hedge fund. You should really look into that one Donna. Ever wonder why in gods name the insurance companies are looking for bailouts? Thats why!

Ralphs parents did a HORRIBLE job of raising him and instilling a good set of core values. Ralph is still scouring his birth certificate to find the spot where it indicates what percent of his parents accumulated assets he is entitled to.

Go back down celler Ralph, The Price is Right is on next!

"it makes more sense for seniors to use the payout for actual long-term care, not a hard-to-use insurance policy." The writer should be fired for this quote. Most people spend down their assets in a year or less then taxpayers foot the bill.

The author of this article apparently has a biased opinion, to put more pressure on brokers to do loans for free. Yes, some seniors purchase annuities and insurance for long term care. Some even buy life insurance in case they pass the home will be paid off in full so the estate will not be left paying off the loan balance. Why is that so bad? Seniors are living on fixed income. An annuity gives the seniors additional income when they are only living off of social security and disability. I would love to see you try living off a mere $1,400 a month on your social security benefits. Did you know that FHA requires the senior to take a counseling class so they FULLY UNDERSTAND what they are getting into? Did you know that during this counseling session, that they are told to watch out for these insurance products? But ofcourse, it is the salesman fault… just like the mortgage broker is responsible for approving and funding stated income loans for subprime. The lenders and investors had nothing to do with it lol.

Reverse mortages are horrible. Just like the people that bought the houses they could not afford, this is people selling there houses, but living in the,, however in the future NO one knows what will be going on with this housing market. And what if the people don't take care of the house? Can the bank fine them, and how easy can it be for this to take a turn for the worse. Reverse mortages are horrible. NO MATTER WHAT ANY OF YOU PEOPLE SAY! Especially because MY GENERATION AND I will have to live with the consquences, not you!

Disagree with me? tell me, rboneillo@yahoo.com

Sorry to hog the space, but this topic is DEAR TO MY HEART.
My Mother lived in her house by herself, her choice, but as she got in her 70's she was literally scared to death, she was going to run out of money. TOO bad she couldn't have gotten a Reverse Mortgage.

What cracks me up is that when I turn 62 if I want to get a reverse mortgage I have to participate in a counseling session to go over all the pros and cons before closing on the loan but when I turn 62 if I want to get a Home Equity Loan and blow the money on lottery tickets no one cares. And before I'm 62 I can get any subprime mortgage that someone is willing to offer me and I don't need counseling. Hypocrites. Why pick on seniors and reverse mortgages? If counseling is a good idea for seniors getting a reverse mortgage why isn't counseling a good idea for everyone who wants to get any type of mortgage. You can do as much damage with a conventional mortgage, subprime mortgage or HEL/HELOC as you can with a reverse mortgage.

You can tell when an article hits home because all the cockroaches come out of the woodwork and this one really hit the spot. It comes down to being educated and informed and the bottom line; reverse mortgage is a business and like any business, the main focus is to make a profit, not to be a do-gooder. Bankers and investors are always looking for new opportunities to increase their portfolios and this is just another opportunity that was conjured up to part people from their money. Reverse mortgage does provide value-added here by assisting our parents in their golden years to live a decent life since our society has taken a self-center path what’s in it for me mentality.

Please, as a professional, try to understand your subject matter. CNN should be ashamed to publish something that isn't accurate. Why not explain that the seniors can easily refinance or get equity lines to take cash out of their homes. I'm positive all the banks are willing to lend money to someone with no job and very little income to make monthly payments. Obama's stimulus package also certainly included provisions for our seniors to modify their mortgage loans.

The title is a poor choice. There are good brokers, and a few bad brokers selling products that are both legal and insured.

McCaskill is running hearings in St. Louis because no one is that interested on a national level. Further, the injury to the insurer is not from the broker, but from the drop in asset value. Home prices have dropped and now the origination value is in question.

AARP reports 93% of homeowners with a reverse mortgage are "fully satisfied" and would choose to do it again. If the author spoke with AARP as a resource for this article, why no mention of this statistic?

yourhomeforlife.com is a resource for those that are interested in the facts, rather than the blather.

Congratulations Bob from Louisville,

Now you can help your parents pay the bills and get to inherit the house

HECM reverse mortgages require the borrower to get HUD approved counseling before the LO can even take an application for a reverse mortgage. That should keep any "vulnerable senior" from having an "aggressive salesperson" push inappropriate financial products on them.

Right ON! Stay away from these things. There are many other vehicles to use instead of reverse mortgages – often personal credit lines for example.

My mother-in-law (against her real-estate friend, banker and tax consultant's advise) took out a $77K RM. When she got sick and needed her home's income to care for her – the RM had escalated to $407K in interest alone (after only 13 years)!

She finally died over a year later destitute as they repossessed her home after 3 months in hospital (you must live in your home consistently – otherwise you are at default).

Many other people have suffered the same fate. One person I know had the RM and the extensive interest penalty imposed when his wife took sick. He could not sell the house to look after her needs and find accommodation for himself with the equity virtually stolen from underneath him!

RM are a shame and so are the people selling them. Just trying to make a fast buck and prey on vulnerable seniors.

p.s. I bought my house with cash, so I did get all my money back except for utilities, and some minor improvements

Here is a thought how about posting a success story such as this. A customer came in to my branch unable to pay their mortgage, medicine for her spouse or the rising cost of living in NJ. A reverse mortgage was a savior for them. While I agree I have seen some unethical practices with taking the funds and then investing and losing the money you are talking about an isolated instance not the norm. If researched properly this is a great product that serves a valuable purpose.

Donna, they saddled you up and rode you like a mule because you wrote a one-sided article, period…and it does nothing but breed fear in the senior community.

Yeee-Hawww!

Why does the reporter arbitrarly paint 'all' loan officers/brokers as scam artists? contary to the reporter's 'opinion', the majority of lenders ARE looking out for the welfare of their clients. Given the slanted view of the reporter, should I now believe ALL reporters 'slant' their articles?

"But make no mistake: Reverse mortgages, which come with high fees and hefty interest charges, are a costly option and often sold by aggressive salespeople who push inappropriate financial products on vulnerable seniors." ??? CNN that is just pathetic. Don't you have Editors? The Product which was designed by HUD, where "smart" seniors doing their home work call in to "unaggressive"/ Helpful/ "Loan Officers" (Who in most cases are Licensed by their state)to findout about how this program can help them. Pull this article immediatley!! Geeess what a bunch of Malarchy.

Looks like you better write a retraction,,,,
I got a reverse mortgage in 2007, house appraised for 2 x my purchase price. Got all my money back and living in MY house the rest of my life FREE……

This is an irresponsible & inaccurate headline.

This appears written to alarm our seniors rather than to educate them.

If you wrote about a race of people with a headline like this, you'd be shouted down and made to apologize. I suggest you do just that.

Sincerely,

Scott Tucker
Author, Reverse Mortgages…from Z to A
Member, National Council on Aging

I think it is safe to say, that the banking industry has clearly shown that the industry as a whole, is only concerned with money, and mostly money in the pockets of top CEO's and other top managers.

Clearly, you should expect anything a bank offers you, to be totally in their favor.

I spent 15 years as a mortgage originator, when I turned 62
I immediately got a reverse loan
to pay off my new mortgage (got divoriced) and got some cas. These
are great programs but get honest
help from a disinterested party.
Take your time and do your homework.

mikpc45@comcast.net

These slime balls tried getting their hooks into my parents one time. Luckily, they asked me my opinion before they did anything, and my brothers and sisters kept them from getting into this reverse mortgage mess.

I REALLY wish that we would allow one day a year, where we could literally "hunt" down and shoot financial predators like this. Just once, I would like to take the law into my own hands.

Hey, Donna Rosato. You just got SMOKED. Nice work. Very professional.

While I have always been amazed at your writer's inability to understand and communicate the inverse relationship between bond prices and bond yields on your "financial" website, the latest one-sided story regarding reverse mortgages illustrates perfectly your lack of financial acumen. Clearly, reverse mortgages are not cheap. Why? Because in an already unstable, nearly collapsing financial environment, lenders are taking large risks by paying for properties that they do not technically own. Therefore, the control over the asset exercised by the lean holder is minimal. Yes, the LTV% is limited to insure some protection — but in a free-fall pricing environment, lenders are taking big risks. The upside. Seniors who really would like to remain in their life-long home can do so in some instances through the help of a reverse mortgage. The fees are higher than a traditional purchase or refinance. But you are talking about a loan with an uncertain amortization schedule. Quit demonizing the brokers and present a balanced and fair account — somrthing clearly missing from this story!

Donna, get your facts straight before you bash a really useful product. This article is nonsense. People like you are the reason consumers are in fear these days. I expect a retraction.

I work for a very reputable lender as an Account Executive for Reverse Mortgages. This product is like most mortgage products that are out there. It may be good for a particular case and not so good for another. I do however understand that their are bad loan originators who don't know this product in entirety and are soliciting them for fast money. If you are considering a Reverse I urge that all seniors and family members do as much research as possible. Once again this loan isn't for everyone and research will help with that decision. There are countless positive experiences i.e. saving a senior from foreclosure and giving them financial stablility. I disagree with CNN asking for negative experiences only…Shame on you! There are bad people out there associated with Reverses, but there are also good people out there trying to make a living and do what's right.

I agree with Brent Cole (posted below earlier this morning). For some, they work; for some, they may not be so well-applied. I know of 3 people who have used the newer reverse mortgage designs, and they are pleased. One was a "cash account" version and the others Hecm. As for Walter In-the-grave (the non-expert), and the author of this drive-by shooting of the mortgage/insurance industry, I have only one recommendation: trade your worthless journalism degrees in for a business degree. Oh . . .but I forget: it's about selling magazines and ad space through fear mongering, not real investigations, isn't it?

This is a horribly-researched article and you should be ashamed of yourself for posting it not only for the facts you do not provide, but also for the tone it is written. Reverse mortgages are excellent financial tools if they are understood and applied correctly by the homeowner.

It all boils down to the end of people buying way too much house and making poor $ judgements while young.

Wow! How many unsupported, inflamatory allegations can one uninformed financial writer cram into an article!

"High fees", "hefty interest rates", "inappropriate financial products", "expensive long term care insurance" that is "hard to use",etc.

Unbelievable…the clients that call my office are living on soc sec and pension and typically have zero in the bank. Most of them are one small financial emergency away from not being able to pay their mortgage or putting food on the table. A RM can payoff their mtg and provide them with the financial security they deserve. Most of my clients are crying after we close the loan because they are so happy. Do you really think those folks care about paying 2 points to us to set this up for them. This article is poorly researched and like everything else the media reports on….Negative negative negative. This is just another poor attempt to blame the broker/loan officer for all the problems in the country. BTW…subprime loans caused people to lose their homes because they got loans they couldn't afford…these loans eliminate mtg payments and make life better for our growing elderly population….comparing these programs to subprime loans is evidence of your inability to understand and make accurate statements. Also, why is it that I am supposed to work for free and no one ever says anything about real estate agents taking 5-6% comm. In declining markets when sellers need all the equity they can get they lose 5-6% right off the top and for some reason this is an excepted practice….

Donna,

Just want to say thanks for always finding the negative news to report. I know several seniors who have taken advantage of a reverse mortgage. They no longer have to worry about making a mortgage payment, they get an income check each month for the rest of their lives, and they know that they will always have a roof over their heads. I suppose that it is the negative news that sells so congratulations on writing another best seller. Next time do some research on how many seniors this loan has helped out.

I sold Reverse Mortgages and the people I sold it too felt it was a God send it gave them income they did not have, they hardly could believe the product was for real. But once they saw they check they belveved. CNN you did a real disservice in this article. Maybe when you get old and find you don't have enough cash to make ends meet and your largest source of cash is your home, maybe you'll understand then what a reverse mortgage is all about.

A fool and his money are soon parted. Educated people make good decisions, the ignorant buy lottery tickets, extended warranties and sub-prime loans.

Whoever allowed this article to be published should be fired along with the person who wrote it! While I am not an expert in the field of reverse mortgages, there is a need and a place for them. The fees have been regulated to prevent lenders from taking advantage of elderly people. And the nonsense about paying for your own long term care out of pocket, are you kidding? One major problem and you can wipe out your life savings in no time. And asking for negative stories or experiences shows no class on the author's behalf, go apply for a job with the National Enquirer, seems to be right up your alley.

What about seniors who still have a mortgage payment and little or no income to cover it. What about those who are about to retire and just saw their retirement implode? I have been researching this program for my parents and it seems like a much better option for them than for me to take care of the bill. Either way, they are using money that I would otherwise inherit, so why do I care if they can use it to stay in their own home and live with their own income? As for the fees, the only exorbitant fee that I have seen is the one charged by the FHA! Also, our broker shared with us the little tidbit that commissions on this product are capped, but the FHA charges are not!! More research would have been a good idea.

Dear CNN, I guess you do not want to report on the tens of thousands of seniors who have had their lives improved by obtaining a Reverse Mortgage. I have personally originated over 300 Reverse Mortgages and have seen lives changed by this product. Do your research before your print your one sided opinion. There are a lot of people in this industry looking out for the best interest of the client.If you want to hear some positives call me. Jack D. Belles, Reverse Mortgage of New England (508)643-8180.

Reverse mortgage as a federally-insured loan product carries a fee of 2% of the appraisal value for FHA insurance … THAT is what makes reverse mortgage so expensive, all the other closing costs are same as any other refinance. This FHA insurance protects the consumer in case the growing loan balance exceeds the home value at the end of the loan. There are ripoff artists in any field, and Seniors have a wide variety of providers from whom to chose for reverse. Your article is mis-leading.

True, Reverse Mortgages are not for everyone (age 62 or older) but it does have its place in the lending industry. Fees are regulated and the homeowner(s) have to go through a counseling program. It is a FHA loan product. Just as the other comments state, tell both sides of the story and try not to sensationalize everything.

I am by no means an expert on reverse mortgages, but the statement "it makes more sense for seniors to use the payout for actual long-term care, not a hard-to-use insurance policy." is ludicrous. Long term health care is brutally expensive. A nursing home can easily cost $60-$120 per DAY or more! You could easily wipe out your entire home's equity in a year or two. Buying long term care insurance with some of the proceeds from a reverse mortgage would be a great idea for most people. The trick is to buy the insurance when you are young and healthy so its not so expensive.

While you add to the mis-information that the media seems to continue to do, check into the facts prior to posting such false articles. One example – "greedy salespeople" and high commissions? You cannot be serious. The max origination fee on a reverse mortgage, regardless of the home value is $6,000. Compared to what brokers of other home loans make, this is hardly a high commission, not to mention that the loan originator only receives a percentage of the income. Again, check the facts, you are, after all, CNN!!!!

POORLY researched article – ref FEES – it is still cheaper to obtain a reverse mortgage than to pay a realtor 6% to sell the home. you get to stay in home for LIFE. this is a HIGHLY reglated product, and the media should not confuse the public by tying the seperate function of what borrowers do with the proceeds together….

Once again, it is fear that you use to draw in readers. Why not rephrase that last question "Please tell us about your experience taking out a reverse mortgage?" You may find that it is a positive experience for many. We specialize in Reverse Mortgages and have no affiliation with any insurance companies. Clients are required to go through counseling. Please report on both sides of a story…not just one.

A reverse mortgage is like any other tool in the tool box: some tools are applicable to getting the job done and others are not. For those particular circumstances where these mortgages fit, and the participants understand the favorable features and possible costs, they are terrific. Two of my neighbors have used them for 2 distinct different reasons, and they've had a great experience–especially the HECM version. For you to say carte blanche they are a negative thing is irresponsible. And to say annuities are "high-priced" financial products is simply amateurish. Are you a source of information, or a disseminator of sour grapes? The guarantees in the newer versions of reverse mortgages are way way better than the old versions. We are actively running the numbers to see if my mother should do one. We are being careful but the cost/benefit ration looks good.

I am a current banker and one of the few that has been against reverse mortgages for years. Unfortunately, with the current state of the economy, it may sometimes be a last hope of income for some elderly clients. I tend to leave it as a last resort and you have to take the clients overall goal in mind. If you are one of those that care more for a commission than their safety and peace of mind, you do not deserve to be a planner or a human in my mind and make those in the financial profession look evil (which I am not). I always place my clients piece of mind ahead of anything else and will always. I need to go home at night and know that i have helped someone in need knowing I have to look at my family with pride than taking a commission home that does nothing more than give you spending money and nothing for the soul.

I have a couple positive experiences with Reverse Mortgages.

yes a neighbor friend of my moms. lady owned her home wholely and her son and grandson lived with her. the son worked as a volunteer firemen and didnt make much money. she came down with the same illiness the M Fox has and racked up hugmongous health costs. so she did a reverse mortgage without telling her son to pay off the medical bills. then she past away and the bank took over the house. she was 79. the bank evicted the son and grandson who couldnt pay the new price for the home as his total income was less than 30k a year. my thought was she should have declared bankrupsty and saved the home.

pat