The New York Times reports the latest news on abuses growing, especially by small companies, including subprime lenders.
A reverse mortgage is a home loan that lets you convert a portion of the equity in your home into cash. Unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence, either from moving or by death. The lender than assumes ownership, selling the house and returning any excess realized to the borrower). However, watch for aggressive and false sales techniques being used by brokers.
Here’s what they’re doing now.
1. Aggressive selling to people who cannot afford the large fees involved in this type of loan.
2. Persuading people to not list their spouse on the loan. After a death, the surviving spouse can be evicted because they have no legal right to the property, other than paying off the whole amount borrowed. (Brokers earn more money when the older spouse is listed as the borrower and an older borrower may be able to borrow more.)
3. Concealing the fact that the home owner has to continue to pay property taxes, maintenance and insurance.
4. Falsely advertising “you can’t lose your home.”
5. Pushing borrowers toward taking one big cash amount with a fixed interest rate, instead of a line of credit withdrawing funds over time. The large interest on a big loan compounds over time so it can exceed the loan amount allowed and leave no resources for the homeowner.
A Risky Lifeline for the Elderly Is Costing Some Their Homes New York Times. This can be a considered a form of Elder Abuse