Reverse mortgages could be the next scam for many

As less-than-honest mortgage brokers look for their next victims after the sub-prime debacle, a U.S. bank regulator is now warning seniors about reverse mortgages, a subject I wrote about for the L.A. Times in February of 2008.

What can seniors do to protect themselves? From a story at CNNMoney.com:

Reverse mortgages could be the next subprime mortgage product to experience rapid growth while taking advantage of a vulnerable segment of the population, top U.S. bank regulator John Dugan said Monday.

Dugan, who heads the Office of the Comptroller of the Currency and supervises some of the nation's largest banks, said regulators are crafting guidelines to ensure that robust consumer protections are in place for reverse mortgages...

Reverse mortgages are complicated loans targeted at homeowners who are at least 62 years old, and allow older Americans to live off the equity in their homes as they age.

In a reverse mortgage, the homeowner receives money from the lender, which does not have to be repaid as long as the borrower lives in the home...

The great majority of reverse mortgages are insured by the Federal Housing Administration and pose limited credit risk. But Dugan said a different class of reverse mortgages -- "proprietary" products -- offer less consumer protections.

Dugan said that as the elderly American population grows, there could be a significant pickup in demand for proprietary reverse mortgages, which he said bear significant similarities to the type of subprime products that helped fuel the housing boom and bust, resulting in a widespread credit crisis and recession...

He said regulators need to set more standards for proprietary reverse mortgages. Regulators also need to be vigilant about misleading marketing and need to crack down on any lenders who try to bundle a reverse mortgage with other financial products, such as an annuity or life insurance product, Dugan said.

Introducing the Reverse Mortgage Adviser Blog

I wanted to introduce readers of Housing Chronicles to the blog at the Web site Reverse Mortgage Adviser. The main site was set up to provide people with information regarding the various types of reverse mortgages, which was something I covered in a feature story for the Los Angeles Times in February of 2008 (and which you can find here). I've added their related blog to my own blog roll.

Who We Are

Reverse Mortgage Adviser is a free service that was developed to assist seniors and their loved ones interested in a reverse mortgage. We are NOT a lender. Reverse Mortgage Adviser is constantly seeking out lenders with a consistent track record of reliability and commitment. In an effort to ensure that seniors seeking reverse mortgages receive objective information, free of fraudulence Reverse Mortgage Adviser is a member of NRMLA and adheres to its Code of Conduct and other Best Practices, in addition to holding a membership with the National Aging in Place Council (NAIPC).

Objective Information

We strive to provide the most up-to-date and honest information, including access to relevant articles, calculators, and analyses. We do all of this so that seniors and their loved ones can learn about the reverse mortgage process in a secure environment, without being hassled by high pressured salespeople.

Straightforward, Honest Help

Our counselors are here to answer all of your questions and help you determine whether a reverse mortgage is the right choice for YOU. We assist you with the research necessary to determine how much you are eligible for, as well as assisting you in finding a reputable and trusted lender. We encourage you to take advantage of our research and utilize our Reverse Mortgage Lender Network for qualified lender recommendations in your area. This is a FREE PUBLIC SERVICE provided by Reverse Mortgage Adviser and you are under no obligation to proceed.

Industry Compliancy

We believe in integrity and know that finding a lender you trust is important. Since dishonest brokers and lenders are a danger to consumers and the industry; we ensure that only the most reputable are included in our Reverse Mortgage Lender Network. Help us to maintain the integrity of Reverse Mortgage Adviser and the industry by reporting any consumer complaints through our Compliancy Center.

Know anyone who's looking into a reverse mortgage? This looks like it would be a good place to start.

L.A. Times story on reverse mortgages cited by The Week magazine

I've been a big fan of The Week magazine (which summarizes national and int'l news in less than 45 pages each week) for about 3 years, and have bought gift subscriptions for friends and family members as a form of introduction. So I was pretty excited today to see that the article I recently wrote for the L.A. Times on reverse mortgages was cited in the current issue of The Week, along with other articles on the same subject in The New York Times and Kiplinger's Personal Finance.

I'm working on other articles as a freelancer for the L.A Times, and remain open to story pitches to run past the real estate section editor; in fact, it was due to an email from some real estate agents in Southern California that I'm now writing an article on California's Props. 60, 90 and 110, which allow homeowners to transfer their existing Prop. 13-protected tax rates to new purchases of the same or lesser value one time in their lives (available only to people 55 or older or those with severe disabilities).

The purpose of writing these articles is simple: provide a balanced overview of real estate-related issues in order to educate the L.A. Times' readership so they can make informed decisions or know where to call or write to find out more. While I am an "industry insider" and work as a consultant for homebuilders and certainly benefit from heightened awareness among clients and colleagues, for these articles I truly have no agenda other than education, and hope that I can provide a valuable service.