A few months ago Nevada’s Attorney General Kathleen Delaney issued a warning about reverse mortgages in one of the worst real estate markets in the country. Delaney said, “we want them to be aware that at the end of the loan period, whatever it is, that that home will basically belong to the lender and will not be available to be inherited by their heirs." We all know this isn’t true, but it brings up a real issue when a government official doesn’t understand a government backed mortgage product.
Delaney isn’t the only Attorney General that has some issues with reverse mortgages. Lori Swanson is Minnesota’s Attorney General and in May she gave a speech to the Bank Holding Company Association where she criticized reverse mortgage products. "We have a lot of unemployed people in the mortgage markets who are looking now for their next job. They want to know where they can focus their efforts after the mortgage and subprime meltdown," Swanson said. "My fear is, if we are not careful, three years from now we will be sitting here wondering how we ever got into this reverse mortgage crisis."
Next Swanson said, "In some cases, they are being told to take out a reverse mortgage so they can invest it, so they can buy long term care insurance or a 15-year deferred annuity. Well, that’s always going to be a bad idea." I know for a fact that buying LTC with reverse mortgage proceeds is a great option for some people, just ask the LTC Expert.
After reading that I thought to myself, who is this lady and why is an attorney giving out financial advice to a room full of bankers? When I looked at Swanson’s bio on the AG homepage I was surprised to see that someone who served as Chair of the Consumer Advisory Council to the Fed would make these remarks. Minnesota has one of the highest foreclosure rates in the country and instead discussing options to help seniors, she decides to scare off a room full of bank executives who now most likely wont be offering reverse mortgages after hearing her comments.