The number of lenders offering reverse mortgages has more than doubled over the past year as reverse mortgages rise in popularity as financially unstable and cash-strapped seniors seek more creative methods to access cash. Investigators with the Government Accountability Office found counseling sessions for the FHA-backed Home Equity Conversion Mortgage (a reverse mortgage) were often too short, failed to cover mandatory topics and neglected to mention alternative loan products. Insufficient counseling can set the stage for nefarious lending practices. As a result, consumer advocates and elder-care providers are demanding stricter counseling regulations be imposed for reverse mortgages.
ft take: The lenders providing reverse mortgages are adept at advertising them, but, as part of their adversarial role, are unwilling to voluntary educate consumers on their consequences. Borrowers have no experience with reverse mortgages to sense what will come. Reverse mortgages have always smelled of predatory lending, eerily reminiscent of the subprime mortgage fiasco which decimated the housing market and greater economy.
Further, the rampant use of new nontraditional mortgage products is evidence lenders and Wall Street will prey on public greed and ignorance when regulations establishing the limitation of allowable risks are not in place. Unregulated loan products will be exploited to the advantage of the same corruptive forces of competitive advantage among bankers to retain investors that perpetuated the poor lending practices between 2004 –2006. The players on Wall Street and the banks supplying the mortgages they pool, fractionalize and sell to investors in bonds have human-enhanced animal instincts that, as financial crises (since 1980) have demonstrated, require the adult supervision which only regulation can provide.
A moment of crisis allows for change or a return to fundamental market regulations. That moment is getting away from us as the recovery sets in and minds are once again dulled by profits.
Re: “Reverse-mortgage boom raising concerns on potential pitfalls” from Chicago Tribune
