Consumer Reports is back and they’ve decided to jump on the Claire McCaskill bandwagon attacking reverse mortgages in their September 2009 edition. Consumer Reports calls Reversals of fortunes an “investigative” report on reverse mortgages but it’s nothing more than a one sided argument against the product.
The article is perfectly crafted to ensure the reader has a gut wrenching feeling when they see a picture of Earl Minor holding a picture of his wife who passed away in a few years ago.
In 2005, the Minor’s decided to use a reverse mortgage to pay off medical bills. His wife was 86, but Earnest wasn’t yet 62, so the couple wasn’t able to qualify. The broker suggested taking his name off the deed so that the loan would be issued solely to his wife.
"The broker told me my name could be put on the mortgage as soon as I turned 62, but that never happened," Minor says. Unfortunately for Minor, when his wife passed away in 2007, he was notified by Financial Freedom that the death made the mortgage payable and that foreclosure proceedings would begin if he did not refinance or pay off the balance.
When his wife closed on the reverse mortgage, she was able to pay off their $70,000 mortgage balance as well as about $91,700 in medical bills, a new roof, and other expenses. The closing costs totaled up to roughly $15,000, which enabled his wife to receive $161,700. That sounds like a great benefit to me, but instead of recognizing the loan was able to help the couple, Consumer Reports focused on the payoff which totaled more than $200,000.
According to Minor, the home is now valued at only $130,000 and he can’t find money to pay off the loan. Attempts to negotiate refinancing or some other solution with lenders have been fruitless.
In a letter to Consumer Reports, Financial Freedom said it "acknowledges Mr. Minor’s unfortunate situation and has repeatedly delayed foreclosure—which is required under HUD guidelines—for almost two years since his wife’s passing to allow Mr. Minor time to find a solution."
The article continues to describe other unfortunate scenarios and features plenty of McCaskill plugs. What it doesn’t describe is any positive stories that stem from reverse mortgages.
To give everyone a little background on how the article came to fruition, National Reverse Mortgage Lenders Association President, Peter Bell, told attendees at the TMBA event in Austin, TX that he spent four and a half days with Consumer Reports going over the program and answering any questions.
He felt confident that the reporter would provide a fair and balanced article but that isn’t what happened. Bell pointed out that the article doesn’t have a byline, which could mean that after the journalist wrote a a balanced article, the editor changed it to reflect their own views.
In response, NRMLA plans to send a letter to Consumer Reports and Bell told attendees that borrowers need to do the same. He suggested that lenders sit down with borrowers and explain to them that unbalanced reports like this might scare people who may benefit from a reverse mortgage. “We need to generate dozens if not hundreds of letters to consumer reports,” says Bell.
I couldn’t agree more. Letters from borrowers to publications like Consumer Reports or politicians about how reverse mortgages have improved lives will have more of an impact than letters from lenders.
Everyone needs to read the article in full, if you don’t subscribe to Consumer Reports you can read the story at the link below.