Consumer Reports Puts Reverse Mortgages On Its List of Financial Scams, Why?

image The March issue of Consumer Reports lists reverse mortgages as one of five Financial “Scams” that consumers should be aware of in 2009.  The report points to videos from James Garner (which aren’t even being aired anymore) and other celebrities as evidence of ways financial firms are enticing seniors to take equity out of their homes through reverse mortgages.

According to the report, reverse mortgages should only be used as a last resort and points to Financial Freedom suggesting borrowers to use the money for "special things you’ve always wanted to do, such as travel or hobbies."

It’s clear whoever wrote the report has it out for Financial Freedom. See below

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Financial Freedom is a subsidiary of IndyMac Bank, which was taken over by the Federal Deposit Insurance Corp. in 2008. A sale of IndyMac is pending.

The dangers are outlined in a lawsuit filed against Financial Freedom. The suit claims that the company advised its business partners to encourage seniors to take out as much money as possible in reverse mortgages so that the fees and interest paid to lenders would be maximized.

The complaint goes on to say that Financial Freedom encouraged and trained partners, some of whom were insurance agents, to sell insurance products to seniors with the money gained from the reverse mortgage. In turn, Financial Freedom would obtain additional interest on the extra money borrowed.

What does Consumer Reports suggest its readers do instead of a reverse mortgage?  Receive counseling…

Financial traps are flourishing