Comptroller Warns Of New Reverse Mortgage Product
HOME LOANS, INDUSTRY NEWS, TIPS FOR SENIORS
June 13th, 2009
One top bank regulator, John, Dugan, wants consumers to be aware of a new reverse mortgage loan product that bears similar characteristics to subprime loans that “fueled the housing boom and bust.” These reverse mortgages fall into a different class referred to as “proprietary products.”
The concern is the fact these complicated loans are targeted to seniors 62 years of age or older. Dugan heads up the federal Office of the Comptroller. He feels regulators need to develop new standards that will protect the growing US population of elderly homeowners.
During an address to the American Bankers Association, he remarked “While reverse mortgages can provide rea
l benefits, they also have some of the same characteristics as the riskiest subprime mortgages-and that should set off alarm bells.”
No information was provided to explain how this new proprietary product differs from the reverse mortgages offered in recent decades. Fannie Mae currently accounts for 90% of the secondary market for reverse mortgages. This government sponsored enterprise (GSE) purchases mortgages from lenders that originate the loans. Bank of America and Wells Fargo are big providers of reverse mortgages, according to a recent article published by CNNMoney.com.
Seniors considering a reverse mortgage should ask lots of questions to determine if the loan they are seeking is the standard loan product offered in years past or the new proprietary type which is the target of this warning. Typically, senior borrowers considering a reverse mortgage are required to be counseled extensively before making a decision to secure this type of loan.
Usage of a reverse mortgage should be considered a loan of last resort. If you plan to live out your life in your home and don’t need the equity for other purposes, a reverse mortgage may be a viable option. I would recommend seniors contact at least two providers of reverse mortgages to compare and contrast the loan terms and costs. Be prepared for the hefty upfront loan fees typical of reverse mortgages, usually in the $10,000-$15,000 range.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
