Reverse mortgages are not necessarily a bad idea for homeowners 62 or older who want to cash out decades’ worth of equity.
But some of the people responsible for subprime and predatory lending apparently have turned to the reverse-mortgage business in force, using high-pressure tactics to trap more seniors into giving away everything and getting little in return.
“There are 2,700 [reverse-mortgage lenders] in the market today, and 1,500 of them made their first loans in 2008,” said Sen. Claire McCaskill (D., Mo.), who has been working on a bill to curb some of the worst abuses - including widening yield-spread premiums that benefit lenders and brokers at the expense of elderly borrowers.
McCaskill was part of a news conference yesterday sponsored by the National Consumer Law Center in Boston, which published a study warning that the reverse-mortgage market shows “systemic problems eerily similar to the subprime boom,” said its author, Tara Twomey.
There are no hard data either for this region or nationally to show how widespread the problems might be.
But at a seminar at the Federal Reserve Bank here last week that addressed mortgage-assistance scams, Assistant U.S. Attorney Michael S. Blume said: “There has been a dramatic spike in the number of reverse mortgages, especially in the city of Philadelphia.
“[Seniors] are vulnerable, often desperate people, who only enter the reverse market because they are having trouble with …
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