More Reverse Mortgage Concerns From National Media

imageRight after I posted about Good Morning America doing a positive piece on reverse mortgages, the folks at Nightline decided air something negative.  The story Back-Stabbed by reverse mortgages? aired Thursday night and judging from the title you can guess it didn’t have a positive spin.

Tom Costello reported on a woman who recently took out a reverse mortgage and is now suing the lender and broker for taking advantage of her.  According to the video, the woman was sold a reverse mortgage as well as a long term annuity product that doesn’t mature until 2033 by the same individual.  The woman claims that all she needed the money for was to fix her porch but the salesman told her to buy a car, go on vacation, ect.  So who is to blame here?

Obviously the annuity product wasn’t the best choice for the woman and the reverse mortgage enabled her to purchase the product… does that mean the reverse mortgage is to blame?  I don’t think so.  Recently I’ve been hearing more about people selling reverse mortgages and insurance products and it does raise some concerns.  While I’m sure not everyone that offers both products are taking advantage of customers, does our industry need to take more of a role in making sure it doesn’t happen?  I think so, but how?

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I thought RMD could be a good sounding board for some ideas from the readers… feel free to comment below!

Back-Stabbed by reverse mortgages?

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  • It just amazes me what the local and national media can get away with. Both news stories were full of incomplete and inaccurate information. We are not selling coffee makers. Every customer has a different set of issues and different goals. Our product provides a variety of solutions for our clients. The news bit never asked the lady why she bought the annuity. Maybe it had a million dollar death benefit for her heirs. We don’t know because the media chose to spin a negative story. Conflict and negative issues sell more commercial time.

    Anyway, back to the question of how do we improve our image and police our industry. The sad fact is white collar crime pays. You have to look no further than our government as evidence of that. If there is money to be made, people with bad intent will figure it out. However, I do believe that crooks are basically lazy so the bigger the entry barrier and the more complex the less likely the really lazy ones will get in.

    We need licensing and continuing education requirements for loan officers. Perhaps criminal background checks too. Anything that requires effort, energy, and some licensing fees will keep some of the bad element away.

  • It pains me to see fear mongering like this piece creates and how it paints the reverse mortgage as a bad deal. In and of itself, a reverse mortgage is just another financial tool. It is what you do with it that puts good or bad value on it.

    I originate reverse mortgages in California (have my DRE license). I am also licensed to sell insurance products such as annuities, but I would never sell them to a senior — never! They simply are not appropriate products for that age group. I have been approached by many reverse mortgage companies to sell both the reverse and the annuity to their customers. You couldn’t pay me enough money to take someone’s reverse mortgage proceeds and put it into an annuity.

    Yes, we need to police this practice somehow. Perhaps requiring that all reverse mortgage originators be state licensed and requiring that they NOT have an insurance license would help. However, many loan originators (or their companies) will send an insurance agent in to see the senior after the loan is funded. So it is not always the same person who sells the senior the annuity. There has got to be some way to require a long “cooling off” period before that is allowed…. More counseling, something…. In the meantime, I continue to warn my clients away from investing their proceeds in products like annuities.

  • I have worked as a loan officer specializing in reverse mortgages for 5 years. Most of us who work directly for lenders are prohibited from advsing or offering any financial products. If a financial advisor is involved, I inform that financial advisor that my relationship is with the homeowner and I will make sure the homeowner understands all aspects of the reverse mortgage, so they can make an informed decision. We actually have documents that state that ask if funds are going into an investment and ask which investment.

    What is going on now is not a surprise. There are reverse mortgage correspondents who have engaged in some shady practices and allowed loan officers to do both loans and investments. One bank even solicited insurance agents to become employees of the bank to do reverse mortgages and then, as a contractor, to offer annuities, etc. I have reported this to HUD, but I don’t believe anything was done.

    I would like to see licensing of loan officers doing this business. NRMLA has a code that should be followed. However, it does not cover the practice of doing a reverse mortgage and investing funds from the loan.

    It is up to us in the industry to educate, inform and protect our clients from these actions. However, the real responsibility also lies with HUD to shut down lenders who practice questionable activities. I did my part, but HUD took no action.

  • I am more confused that the borrower didn’t understand what was presented to her at counseling – if she didn’t understand what was being said to her why was the counseling not done in Spanish or with one of her children present? Maybe I am more sensitive than most, but I always ask the homeowner if they have children who would like to have the process explained to them. Most children I talk to want to attend the counseling sessions, or be on the phone when they take place and ask questions – especially if the parent doesn’t speak english well or might not understand everything being explained to them. Her children are highly concerned now – but where were they during the process? The loan officer in this case should have made arrangements for either a translator or her children to be present while the counseling was going on- you can’t tell me there isn’t a spanish translator in Los Angles….

  • Licensing loan officers and more scrutiny is warranted. However, all the details were not given in the news piece. And again, as long as it is a “good story” the news media will run on it even without THEMSELVES doing their own “background checks”! Every single loan officers needs to remember we are dealing with people who are easily led and can be often easily deceived. HUD getting involved more is the best idea.

  • Hey John,

    let’s be real clear here about the reverse mortgage / annuity thing. There are one or two companies ( i know them and i will, for whatever reason, leave their names unknown at this moment)..making a small killing with imediate annuity commissions on top of their reverse commission. Any sane individual realizes that that an immediate anuity offered by an insurance company (for reverse mortgage funds)is a 100% bona fide loser versus the bank’s more flexible payment plans. The only winnder (so far) is the agent who is making the bundle of kommish. The idea that the immediate annuity is superior because it prohibits the banks credit line from dissolving in the case of the house burning down, for ex) is hogwash…since the bank will not dissolve the credit line while the insurance rebuilds the home.

    I left the annuity industry (yes, it is it’s own industry…) because of all the forked tongued sales pitches that were required in order to actually sell the crap. And sure enough, the virus is infecting the reverse mortgage industry now, and there are more disclosures and yada yada yada…and the public is getting confused again and the regulators are scrambling…

    The public cannot distinguish the mud when it hits the fan, whether the the rm is to blame or the annuity or the agent or what…meanwhile, the senior too often is gullible with shrewd salesman who use the good knowledge they do have to manipulate the senior for their own ends such as double commissions….

    All the disclosures to protect the senior are already there so i don’t know how else to legislate and / or administer the sales of these products. Perhaps have the loan officer sign an affidavit that if they are going to sell reverse mortgages they must agree to NEVER sell an annuity to the same client, or more specifically, never agree to accept commissions for an annuity from that same client.

  • I just finished reading an article about a network news program that did a negative report on reverse mortgages, citing an incident in Los Angeles of a senior borrower who was talked into buying annuities that did not mature until the year 2033 without a substantial penalty. I saw the actual Nightly News piece with Tom Costello. I was very concerned with the piece because I saw that they interviewed a woman identified as Robin Talbert with the AARP. I have to believe that only part of Ms. Talbert’s comments were represented in the piece on the program as her comments stated “We’re all living longer and you don’t want to outlive that equity in your home” to which the piece cut away immediately to Mr. Costello who added “Because the bank could then take the home”. Ms. Talbert is absolutely correct, and the AARP champions all things for seniors, but they are extremely aware of how reverse mortgages operate and Mr. Costello’s remarks are done in a way to mischaracterize reverse mortgages.

    This is the type of misinformation and misreporting that we have been running into for several years now. While I do not know all of the borrower’s circumstances in this particular situation and I always get extremely angry when I hear of any mortgage professionals who do not keep the borrower’s best interests at heart, it is not the Reverse Mortgage that is the “rip off” here, it was the end use of the funds. The notion that the bank will take the borrower’s home when her equity is gone is just plain wrong and bad reporting. The whole idea behind the reverse mortgage and one of the reasons the borrowers pay mortgage insurance is that no matter what happens to the equity, the borrower will never make another house payment and the borrower or the borrower’s heirs will never owe more than the property is worth, regardless of what the equity position does. The loan is set up so that you own your property, not the bank. If the Nightly News or Mr. Costello had researched reverse mortgages more thoroughly, they would have learned that if the borrower had chosen what is known as the “tenure option” or payments for life, she would have received those payments for the rest of her life so long as she continued to occupy the property and the bank would never “then take the home” when the senior outlived the equity as the report leads the listener to believe.

    I think it is very important for seniors to not only go through the required counseling, but also to enlist the assistance of their loved ones or trusted financial advisors whenever available. In this piece, the borrower said she didn’t really even need the money, she was doing just fine without it. Her daughter was with her during the television interview and maybe if she had been with her during the reverse mortgage process, she could have helped her to keep from getting the loan in the beginning. Another piece of advice, don’t ever go into the process with someone who is only looking to sell you another product or service. If you don’t need a reverse mortgage and someone is trying to sell you one so that you can buy something else, or you do need one for living expenses and then someone tries to tell you that you should put the money into something else instead, find a reverse mortgage specialist who is only looking to help you fulfill your reverse mortgage needs. Many people have used reverse mortgages as retirement tools but make sure that your use of your funds is from your careful plan and decisions, not from someone else’s salesmanship.

    Reverse Mortgages can be a very viable retirement tool and I’ve seen them help many senior borrowers. Like almost anything, they can be abused but if you take the time to research the products and the people with whom you are working, the reverse mortgage can be the difference to many seniors of staying in their homes or having to leave; between barely surviving and aging in grace and dignity. I would hate to see a senior borrower avoid this viable option that may be badly needed due to bad or partial reporting.

  • I haven’t yet seen the piece, but I’m not surprised. Frightening people gets ratings and elects political leaders. If anything, I am surprised that the negative press took this long to develop; I’ve been involved with the industry for 4+ years, and have encountered more than 1 ethically-challenged brokers along the way.

    NRMLA has a golden opportunity to call a press conference and respond loudly that our industry will not tolerate abuses (if they haven’t already). Let’s break the mold of the traditional mortgage PACs and be the leader in regulating our field.

  • I haven’t yet seen the piece, but I’m not surprised. Frightening people gets ratings and elects political leaders. If anything, I am surprised that the negative press took this long to develop; I’ve been involved with the industry for 4+ years, and have encountered more than 1 ethically-challenged broker along the way.

    NRMLA has a golden opportunity to call a press conference and respond loudly that our industry will not tolerate abuses (if they haven’t already). Let’s break the mold of the traditional mortgage PACs and be the leader in regulating our field.

  • One way those of us who offer reverse mortgages can protect our industry’s reputation is by ALWAYS urging senior homeowners to involve their family members either in person or through access to us and/or the counselor through mail, email, phone etc. The family members should be a part of the counseling process whenever possible.

    It is my personal opinion that those who offer reverse mortgages should not in any way shape or form be involved in offering any other product that even hints of financial services, investments or insurance.

    Keep it simple…Keep it clean

  • I have only recently begun providing the reverse product, after exhaustive reading and questioning. Five years ago I would not have used this product, but now it is the RIGHT WAY to assist seniors to have a better way of life. The media wants viewers and listeners – good loan officers want happy borrowers who can improve their quality of life. I agree with all that I have read – licensing and laws that forbid cross selling and referrals would be more helpful that terminating the product or holding the entire reverse industry responsible for the acts of the few.

  • I felt the same distress as all of you when I saw this news report. My company also does forward mortgages and always has the borrower’s best interests at heart regardless of the loan product. There is plenty of money to be made honestly by selling people loans that they want and need, plus getting referrals from happy, satisfied customers! I am very VERY tired of the loan industry being bashed by the media. I also believe that the quality of journalism with respect to our industry has been extremely shoddy, misleading,full of half-truths and outright misinformation. Where is the fact checking in all this? Clearly the media are not doing their job, so we have to do a better job of ours. NRMLA and all the major reverse mortgage banks need to be proactive on this subject. NOW! A major advertising campaign would not hurt. What are you waiting for, NRMLA?

  • My husband is retired and still working many hours a week. I am much younger than him but still nt in my big earning years. They have passed me by. I wonder what the qualifications are for a reverse mortgage. We have a modest home in a growing area. We are very centrally located. My husband is self employed. I derive my income due to his business. So what are my options?? I don’t want to be left with huge payments when he passes. I will also be elderly at that point.
    Our payment is high but neither one of us are planning on leaving our home to our offspring.

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