McCaskill urges reform on reverse mortgages
St. Louis Post-Dispatch, June 30th, 2009
Poor oversight of the fast-growing reverse mortgage industry leaves
older people vulnerable to scams and could burden taxpayers, U.S. Sen.
Claire McCaskill said Monday at a hearing on the federally insured
loans.
The hearing at Ochs Senior Center in Heman Park was technically a
meeting of the Senate's Special Committee on Aging. But McCaskill was
the only committee member present. For more than two hours, she
questioned local consumer advocates and grilled Washington-based
government regulators and a representative of the reverse mortgage
lending industry.
Reforms of reverse mortgages are needed, McCaskill said, to protect
consumers and to avoid a meltdown similar to the one that preceded the
recent real-estate collapse.
"If we learn nothing from the subprime mess, we all deserve to be
horsewhipped," McCaskill said after the hearing. "The (reverse
mortgage) program can be a great benefit to seniors … But, if it goes
badly, it's the American taxpayer that is holding the bag."
A reverse mortgage is a special type of home loan that lets consumers
convert a portion of their home's equity into cash. It's different from
a home equity loan or second mortgage, because borrowers do not repay
the loan as long as they live in their home and pay insurance and tax
bills. Typically, loans are repaid after the borrower moves or dies and
the home is sold.
The vast majority of reverse mortgages are backed by the government.
The federal government has backed about 500,000 reverse mortgages since
1990. If some projections prove accurate, that number could jump to as
high as 700,000 this year.
Read more of this article.About Reverse Mortgages: Learn all about reverse mortgages at NewRetirement.com