NEW YORK - Reverse mortgages may be the next subprime crisis, according to the National Consumer Law Center.
Some of the same US lenders that helped drive the real estate boom with loans to home buyers who could not afford the payments are now targeting senior citizens, the center said. Brokers, who are given financial incentives to sell the loans, may be making misleading claims, according to a report titled “Subprime Revisited,’’ released yesterday by the Boston-based NCLC.
“This market is designed to serve seniors, so when we find abuses cropping up and migrating from the subprime market to the senior market, that sounds an especially loud warning bell,’’ said Rick Jurgens, an advocate at the NCLC who contributed to the report.
Reverse mortgages enable people 62 and older who are looking for extra cash to use the equity in their homes and receive lump-sum payments, periodic checks, a line of credit, or a combination of the three. Lenders are repaid from the sale of the home when the borrowers die or move.
Kohl and McCaskill released a government report in June that said some lenders falsely market reverse mortgages as “lifetime income’’ and sell mortgages coupled with other financial products, such as annuities, even though Congress banned so-called cross-selling in 2008.
The center’s study recommended enhancing borrower counseling prior to taking out a loan and holding lenders and brokers to a suitability standard.
Wednesday, October 7, 2009
Reverse mortgages may be the next subprime crisis
Reverse mortgages may be next crisis - The Boston Globe