With a reverse mortgage, an elderly homeowner can pull equity out of their home for living expenses, while continuing to live in the home.
With the economy in the dumps, demand for reverse mortgages are on the rise. The homeowner can cash out on the equity, live in the home, and upon his death, the provider of the reverse mortgage owns the home. It’s almost like all those years of making the house payment was really a means of retirement.
But a new report on reverse mortgages from Consumers Union says it’s not that easy. “Reverse mortgages should only be a last resort for seniors,” said Norma Garcia, senior staff attorney for Consumers Union.
According to Garcia, “Reverse mortgages are a very risky deal for borrowers who don’t understand the complicated terms of the loan and how quickly fees and interest charges can add up.”
The report, released by the publisher of Consumer Reports magazine, the California Advocates for Nursing Home Reform, and the Council on Aging Silicon Valley, says that with some reverse mortgages, seniors can be at risk of losing their homes before they die. It lists concerns ranging from misleading marketing to the pushing of other products to the homeowner, and a growing number of borrowers that default on reverse mortgages, causing foreclosures.
The groups involved in the report are calling for oversight from the federal Consumer Financial Protection Bureau, which is being set up through the Obama administration’s financial reform legislation.
Consumer reports is offering tips on reverse mortgages through their site at: www.consumersunion.org.