The financial industry made a killing in fees by marketing annuities to senior citizens. These products were not usually appropriate for the people who were urged to buy them, and now many are stuck with them while the financial firm agents padded their bank accounts. Many firms such as MetLife and Prudential were slapped by regulators for their sleazy practices in selling annuities.
What is the new sleaze that is replacing the annuities? – Reverse Mortgages. Even in the down real estate market, the financial industry has found they can make a killing by selling reverse mortgages to senior citizens. Reverse mortgages have high fees, many times well over 7% of the home’s value – making this a very lucrative business for agents on commission.
FINRA (the Financial Industry Regulatory Authority) issued a warning this week about reserve mortgage products, urging senior citizens to carefully weigh their options before using reverse mortgages to tap their home equity for additional retirement income.
Friday, March 14, 2008
Warning: Reverse Mortgages
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1 comments:
I appreciate and share your concern about those who try to swindle seniors in any fashion. I am on record as opposing seniors purchasing deferred annuities, and especially anyone coercing them into using the proceeds from a reverse mortgage for such activities.
I urge you to use caution, however, in painting an entire industry with such a broad brush. Like any loan ever invented or imagined, it is not for everyone. But for those for whom it is designed, it can be a godsend.
Just yesterday, I received a phone call from a 78 year old widow who is on kidney dialysis, and she is currently behind on her mortgage payments. She is behind the 8 ball in the worst sense. While some may suggest she just sell and downsize, in her case, this would not necessarily solve her problem when you consider the financial, physical and emotional toll on her. In her case, a reverse mortgage will eliminate her monthly mortgage payments, save her home, and allow her to live the rest of her life where she is familiar and comfortable.
While the most cynical might say we're just in it for the money, believe me when I tell you that when I received her call yesterday, I was determined to solve her problem for her. She told me of other lenders who gave her empty promises to help, but the reverse mortgage can genuinely do it.
Please be careful with the broad brush. There is much more legitimacy to reverse mortgage, its lenders, and its beneficiaries than the media and cynics like to admit.
Thanks for the opportunity to provide a little balance to this serious topic.
~Corey Matelli
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