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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