Time Magazine published an article about how the recession has been brutal for older Americans who were counting on their depleted net eggs are turning to reverse mortgages to help supplement their stash.
In the three months after February–when a provision in the economic-stimulus package raised the eligible home-value limit from $417,000 to $625,500–the number of federally insured reverse-mortgage originations jumped 10% compared with the same period last year. Industry experts predict that reverse mortgages will play an increasingly important role in the coming years as some 70 million baby boomers hit their 60s–often with a lot less saved than they’d hoped.
This has some folks in Washington concerned. In June, the Government Accountability Office said it had uncovered misleading marketing practices in the reverse-mortgage industry, and Missouri Senator Claire McCaskill, a longtime consumer advocate, chaired a hearing to investigate predatory lending tactics.
Comptroller of the Currency John Dugan recently noted that reverse mortgages, like some flavors of the infamous subprime mortgages, are too complex for many seniors to understand. "Millions of older Americans still have a lot of equity in their homes, and it’s tempting for them to tap into this pot of money," he says.
Still, under the right conditions, these loans can be a sensible solution to a tough financial situation. To read the rest of the article click the link below.