The Wall Street Journal is reporting on the back and forth between the Consumer Union’s report and reverse mortgage trade groups from last week.
According to the article, advocates worry that if more isn’t done to help consumers understand the risks associated with reverse mortgages, the market could melt down just like the subprime mortgage market did ahead of the financial crisis.
Peter Bell, president of the National Reverse Mortgage Lenders Association told the WSJ, “I think they’re rattling the cages here without having much concrete to offer or any evidence to back up their allegations that there are widespread problems.”
“We understand that the demographics are in our favor. The market will grow and the need will grow because people need to fund longevity, but it will only grow if consumers feel the products are fair and the people who offer them are trustworthy,” said Bell. “If the regulatory regime helps get us there, that’s great.”
One of the biggest nuggets of news in the article comes from an unnamed source at the consumer financial protection bureau. The individual told the WSJ it’s beginning to look into reverse mortgages and plans to build on the Federal Reserve and GAO’s efforts to improve disclosures and prevent misleading advertising.
As part of the Dodd-Frank reform bill, the agency is required to conduct a study on reverse mortgages to identify deceptive practices and figure out whether suitability standards are necessary. The agency also has the authority to issue regulations, orders, or guidance that apply to reverse mortgages prior to the completion of the study.
Barbara Stucki, VP at the National Council on Aging told the WSJ she expects reverse mortgages to become more popular sources of income for retirees.
“Today’s retirement realities are daunting and when you combine that with the economic challenges, people are going to be tapping the equity in their homes,” she said. “We want to make sure that options like reverse mortgages are viable and properly regulated.”
Read the rest of the article at the link below.
Reverse Mortgages Debate Heats Up As US Consumer Bureau Zeros In
