Over the weekend, the Orlando Sentinel published Reverse mortgages a lifesaver for some, but beware of shady lenders, and despite the negative sounding title it’s pretty positive. Journalist Richard Burnett writes that while reverse mortgages were shunned by many as too risky, the loans have made a comeback as many seniors tap their home equity to replace savings battered by Wall Street’s meltdown.
The article details how Don Mulcahy, a 68 year old former telephone salesman from Orlando used a reverse mortgage and liked the idea so much that he started selling reverse mortgages himself. "It’s not for everyone," Mulcahy said. "But it turned out to be such a good deal for me, I figured others should know about it."
Burnett writes that when HERA capped major fees and provided some additional safeguards, the product looks much more attractive. He also points out that the industry has worked to improve its reputation by adopting conduct standards and responding to complaints.
"There are definitely more safeguards now," said Joe Nunziata, chief executive officer of Orlando-based FBC Mortgage, the lending unit of Florida Bank of Commerce. But the industry still has a way to go to get a clean bill of health, AARP says.
"Despite the new laws, we are already still hearing reports of reverse-mortgage lenders selling high-priced annuities and other investments to borrowers," said Bronwyn Belling, a reverse-mortgage analyst for the AARP Foundation. "Regulators are paying close attention to this problem, and we’re going to continue to watch it very closely."
The article also point out how a couple of years ago, nearly everyone who applied for a reverse mortgage in Florida had enough home equity to make it work. Now maybe half of the applicants are eligible.