The modern day reverse mortgage has been around since the late eighties. The first one closed in 1989. Since that time, until recently there have been, there were no stories of senior reverse mortgage borrowers being coerced into purchasing other financial products as well.
The reason for this is quite simple. In the nascent years of the program, the only people that were “selling” (it is not really a product that is sold) this program were people that cared about and had a deep affinity for our elders. Like most new programs, it has evolved.
In the early years, it should be pointed out, the program contained an equity sharing feature, which has long since been abandoned. In the early years the issue was with one of the features of the program. Today, it is with those firms that see the reverse mortgage program as a means to sell other products and with those firm that feel they have to coerce seniors into signing on the dotted lines.
In 2000, HUD created an “advisor” type program for those that were not licensed with FHA. This was seen as a way to get this loan out to more seniors. However, it did not take long for this idea to be transfigured into something sinister.
Alliances were made with those in the financial planning industry. Soon, it became common practice, for those to maximize profits by selling annuities along with reverse mortgages. Some in the industry voiced disapproval over these practices. Can this be mortgage debacle redux?
The answer to this is absolutely NO. The current mortgage trauma this country now faces is the result of poorly designed mortgage programs. This is not the case with reverse mortgages. Since the Alt-a and Subprime markets have dried up, some of those folks have invaded the reverse mortgage industry.
While some may pounce on the notion that keeping certain people out of an industry smacks of restraint on trade, I would suggest that safeguards are needed to protect our seniors from those who do not have their best interest in mind. To put it more bluntly: Seniors must be protected from those miscreants who feel it is their job to take advantage of our elders. Shame on them. Shame on the industry for letting it happen. What the industry can not do, Congress and the state legislators will do. And that is not an appealing thought. Misconceptions about the program also flourish within the halls of our state capitals and congress.
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