According to National Consumer Law Center (NCLC), reverse mortgage would be the next sub-prime disaster. It has been noticed that the brokers are making mis-leading claims to the senior citizens in order to give them reverse mortgages. Also, the lenders who were responsible for the real estate boom and the resulting crisis from it are now targeting seniors for reverse home loan scams.

How do lenders scam seniors looking for reverse mortgage?

Some of the reverse mortgage lenders market their products as retirement income. Though the cross-selling has been banned by the Congress in 2008, yet the lenders have been selling annuities along with reverse home loans. Some of the brokers are even seeking higher fees which have led to long-term annuities. In my opinion, this is inappropriate for the seniors as it would tie up their retirement savings for years to come.

It is true that reverse mortgage plays an important role in order to help seniors get mortgage. But it’s important that there should be transparency so that consumers are protected. The government should not only enforce the rules regarding transparency but also ensure that the rules are being followed by the lenders.
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Reverse Mortgage, also known as “Aging in Place”, has been quite popular with the senior citizens since its inception in 1987. FHA along with Congress, NRMLA etc. are continuously working towards making reverse mortgage more attractive for the seniors.

Senior citizens who are aged 62 years or above could earlier cash out home equity with the help of reverse mortgage. But from 1st January, 2009 onwards, reverse mortgage will be available to senior citizens to buy their primary residence as well. Along with this, the reverse mortgage limit has been raised to $417,000 nationwide and those living in high cost areas can qualify for loans even up to $625,000.

It was noticed that the reverse mortgage program which was introduced to keep seniors in their home wasn’t helping those who wanted to downsize or those who were keen to move closer to their kids. But with the new development in reverse mortgage, things have become easier for the senior citizens.

With the raising of the reverse mortgage limit and changes in the traditional reverse mortgage, I think, a lot of senior citizens will be benefited. In order to get a reverse mortgage, it was necessary that the senior citizens had their own residence. The reverse mortgage was mainly used by them to pay off debts and medical bills. But now, seniors can also buy a home of their own with the help of a reverse mortgage.