Congress Eyes Crackdown on Reverse Mortgages
Buyers should always beware, but seniors looking at reverse mortgages will soon get a little help from Uncle Sam, too.
Abuse of reverse mortgages will prompt Congress to tighten the rules
Reverse mortgages were created as a way for people 62 and older to turn their home equity into retirement income. They allow a homeowner to borrow money, paid to them – often on a monthly basis -- with no payback required until the homeowner passes away or moves out. The loans can be attractive because borrowers are guaranteed that they’ll never have to pay back more than their home is worth, no matter how long they live and draw payments.
Reverse mortgages can be a big help to seniors who need more cash coming in after they stop working. And there are a lot more in that category today. The stock market losses of 2008 put a big dent in many a nest egg, leaving lots of seniors with smaller interest and dividend checks and less savings to draw upon in a pinch.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The problem, according to critics, is that some lenders are taking advantage of seniors by luring them into loan terms without explaining what can be high costs and long-term consequences. “That leads to a number of problems for seniors,” says Tara Twomey, counsel with the National Consumer Law Center. “We are going to see their equity drained away by brokers and lenders.”
Aggressive lenders and a growing number of retirees have boosted growth in the reverse mortgage market to more than 100,000 this year from about 43,000 in 2005. The aging population means “we now have a lot of borrowers eligible for reverse mortgages,” says John Courson, president of the Mortgage Bankers Association.
Another potential problem involves falling home prices. The federal government guarantees about 95% of reverse mortgages, so if home values fall below the loan amount, that could mean a bigger deficit.
Lawmakers who don’t want to see problems mount will insist on tougher enforcement measures. Sen. Claire McCaskill (D-MO) is readying a bill now that would boost funding for borrower counseling and tighten reverse mortgage rules. “Something needs to be done before more life savings are depleted and more tax dollars are drained,” said McCaskill in a statement.
For weekly updates on topics to improve your business decisionmaking, click here.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
-
Eight Easy Ways to Save Money Without Compromising Your Lifestyle
Saving money can be as simple as a quick phone call.
By Kiplinger Advisor Collective Published
-
Five Ways to Save Big On Your Phone Bill When Traveling Abroad
Traveling internationally and want to save cash? Here are five smart ways to save big on your phone bill.
By Kathryn Pomroy Published
-
Commercial Real Estate Outlook 2024: The Kiplinger Letter
The Kiplinger Letter In 2024, expect hybrid and work-from-home trends, tighter budgets, rising rents and the demand for data centers to continue.
By Rodrigo Sermeño Published
-
Delinquent CRE Loans Are on the Rise: The Kiplinger Letter
The Kiplinger Letter Banks are expanding their efforts to restructure CRE loans to avoid losses from the commercial real estate sector.
By Rodrigo Sermeño Published
-
As Mortgage Rates Rise, Renting Is Now Cheaper Than Buying for Many: The Kiplinger Letter
The Kiplinger Letter A jump in mortgage rates has caused housing affordability to slump and priced many first-time home buyers out of the market.
By Rodrigo Sermeño Published
-
Rental Market Will Slow Through 2023: The Kiplinger Letter
The Kiplinger Letter Expected growth in the rental market is likely to remain slow for the rest of the year amid a slow housing market and cooling economy.
By Rodrigo Sermeño Last updated
-
Selling Your Home? Set the Right Price
real estate If you're selling your home, setting the right price is crucial. Don't overprice or you'll scare away prospective buyers.
By Donna LeValley Last updated
-
WFH Impact on Commercial Real Estate Market: Kiplinger Economic Forecasts
Economic Forecasts Commercial real estate continues to struggle. Office vacancies hit 18.9% in the second quarter of 2023.
By Rodrigo Sermeño Published
-
Greenland, U.S. Plans to Boost Tourist Economy: Kiplinger Economic Forecasts
Economic Forecasts A U.S. congressional effort could see some Canadian visitors get longer stays, meanwhile, Greenland bids to be the next vacation hotspot.
By Sean Lengell Published
-
China’s Economy Weakened by Low House Prices and Falling Exports: Kiplinger Economic Forecasts
Economic Forecasts China’s economy lost momentum in May due in part to fewer exports and declining housing prices, but the country’s fast fashion retailers are booming.
By David Payne Published