Senator Claire McCaskill held a Special Committee on Aging Field Hearing this week to examine reverse mortgage industry problems and possible solutions. McCaskill feels that while this can be a useful tool for some, many elderly homeowners are prime targets for predatory lending schemes in a rapidly growing industry said a press statement.
During her speech, she expressed her concerns about lax oversight that is leaving seniors vulnerable to predatory practices leading to fraud and victimization. “Not only are seniors the victims of reverse mortgage fraud, but taxpayers are also, because taxpayers insure the mortgages. I am deeply concerned about these issues,” said McCaskill.
During her opening statement she said:
I am pleased to have with us today, Daniel Claggett from the National Consumers Law Center, who is shortly will release a report that documents many Reverse Mortgage abuses and warns seniors of scams to avoid. I applaud the center for its important work on behalf of our seniors and look forward to the report.
After reading Claggett’s prepared statement, nothing he says documents specific events of reverse mortgage abuse. Calggett does say that there is an urgent need for more resources at the federal and state level to protect consumers from reverse mortgage abuse, but he doesn’t mention any actual cases.
The National Consumer Law Center will be releasing a report in the coming weeks
that will detail needed protections and improvements in the reverse mortgage market. These recommendations will include:
- Strengthening borrower counseling, which to date remains inconsistent and
- Banning yield spread premiums, which incent brokers to make loans more
profitable for lenders and investors at the expense of borrowers.
- Regulating proprietary reverse mortgages
- Improving data collection on reverse mortgages and other equity conversion
products that are not currently reportable under the Home Mortgage Disclosure Act.
NRMLA’s Peter Bell took part in the hearing and I thought his prepared statement did a great job addressing McCaskill’s concerns, especially regarding how reverse mortgages can potentially be a source of problems for seniors.
Comptroller Dugan, Inspector General Donohue and others have all pointed out that seniors are vulnerable, that scams and fraud are frequently perpetrated against older folks and that reverse mortgages can potentially be a source of problems. However, no one has identified any incidence of widespread malfeasance specifically in reverse mortgage cases. In fact, there’s been virtually very little.
We have been polling state attorneys general offices, bank regulators and FTC and found the incidence of complaints about reverse mortgage lenders to be minimal or non-existent. We received a similar response to an inquiry to the Conference of State Banking Supervisors. Several weeks back, I had the opportunity to address a conference of the chief consumer complaint officers from all of the federal bank regulatory agencies, including the FRB, OCC, OTS and FDIC, as well as several state regulators, hosted by the Federal Reserve Bank of Kansas City. When asked during a panel discussion, the representative of each agency reported that they had few, if any, complaints about reverse mortgages.
I am not denying that there are entrants to the reverse mortgage business who’d we all be better off without. Every business has its share. But, by and large, there is a community of properly-motivated, responsible companies making reverse mortgages available across the country. Servicing seniors is their priority. Those are the companies that consumers should be drawn to.
At the same time, we must recognize that once a senior has gotten a reverse mortgage, no matter how protected she or he might have been during the loan origination process, there is now access to what could be a substantial amount of money – potentially attracting others looking to swindle the homeowner. These are societal problems; they’re not reverse mortgage problems. Laws are in place to protect seniors from elder financial abuse. We must all work together to enforce the laws, catch and convict any culprits who take advantage of seniors.
You can see all of the hearing documents here.