A reverse mortgage can be a valuable means of support for a senior citizen, allowing the homeowner, aged 62 or higher, to pull equity of his or her home. The money can come as a one- time payment, in monthly installments or as a line of credit to be drawn on when needed. The mortgage is repaid when the senior sells the residence or after his or her death by the heirs.
The maximum allowed on a reverse mortgage is $625,000 and more than 110,000 such loans aggregating more than $17 billion are entered into annually by America’s senior citizens, according to the National Consumer Law Center. Such a large financial market inevitably attracts abuse, however, and predatory lending practices have begun to emerge in reverse mortgages. Loan brokers might use high pressure tactics on the unwary senior and fail to evaluate the appropriateness of the loan in an effort to secure commissions. Similar to the disastrous subprime mortgage collapse, financial institutions have been passing on the risk inherent in these loans to other investors, thus attempting to insulate themselves from the potential consequences of granting high risk loans at a time when housing prices are still unstable.
In addition, predatory loan brokers may package other financial products or insurance into the reverse mortgage to generate additional revenue for themselves. Since reverse mortgages are explicitly aimed at senior citizens, the potential always exists that the aging homeowner may not be able to make the best decision when confronted with the combination of financial needs, high pressure sales and confusing documentation. In some cases, the senior may put their title to their home in jeopardy without realizing it.
If you think you or a member of your family may have fallen victim to a predatory reverse mortgage, please contact us to discuss your legal options.