When seniors use reverse mortgages as a “quick fix” for cash, the strategy can sometimes backfire, writes NBC.
“As America’s population ages, the hard sell is on for reverse mortgages. Promising happier days ahead, the former ‘Fonz,’ actor Henry Winkler, is giving the hard sell in relentless television adds,” the article says. “But the housing crash and the fiscal state of today’s seniors are causing many of these loans to backfire.”
NBC focuses on the AARP-publicized case of a Maryland couple who took out a reverse mortgage in 2008 with only one spouse listed on the loan. The borrowing spouse unexpectedly died just one month later, and now the surviving spouse is facing foreclosure.
“It was set up bad,” Robert Bennett, the surviving spouse, told NBC of the reverse mortgage. “I wasn’t thinking that—that I would be crossed out completely if she died.”
A problem associated with the loan, according to the article, is that reverse mortgages are often being used “for all the wrong reasons,” leaving seniors with less home equity, less savings, and more debt.
“This was originally contemplated as something you could draw money from over a long period of time, as a way of supplementing your income or providing income when you had not others. Now a lot of people are looking to reverse mortgages as a quick fix,” said David Certner, legislative counsel for AARP, to NBC.
However, if reverse mortgages are used correctly, they can be a valuable tool with built-in safeguards, said Peter Bell, president of the National Reverse Mortgage Lenders Association.
“The reverse mortgage, unlike any other financial service in the United States, requires every single borrower, prospective borrower to go before an independent third party reverse mortgage counselor at a HUD-approved, HUD-funded counseling agency prior to even making an application for the loan,” said Bell. “So where somebody is coming off title would be in a discussion.”
Read the full article at NBC.
Written by Alyssa Gerace
