Reverse Mortgages Could Ruin Your Finances? Local Media Gets it Wrong

Ric Romero from ABC 7, Los Angeles, CA recently ran a segment on how Reverse Mortgages could ruin your finance.  According to Romero, the story is based on its investigation into reverse mortgages with Consumer Reports.

The report tells a sad story about 83 year old Arlene Schwemmer, who is no longer able to live on her own and has had to move. She’s devastated that she’ll get nothing from the sale of the home she shared with her late husband for 49 years.

Its not clear why she has to move, but Arlene’s daughter blames the reverse mortgage on a broker who reportedly persuaded her parents to take out the loan years ago and feels that the terms of the loan were complicated and hard to decipher. 


"The decision on the reverse mortgage was one of the worst decisions I think my folks had ever made. It was tragic," said Diane Zaugg, Arlene’s daughter.  I’d like to ask the daughter where was she when they decided that they needed to take out the reverse mortgage? 

She also said the broker steered her parents into a poor investment, and Arlene has seen little of the money.


What’s frustrating about the segment is that the reverse mortgage is seen as the instrument for causing her to move out of the home.  As we all know, a reverse mortgage does the exact opposite.

This segment is starting to pop up on local media outlets across the country, so don’t be surprised if it shows up on your local media station soon.  

Reverse mortgages should be last resort

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  • What is going on with all of these bad press stories? NRMLA we need you more than ever to get on top of the press nationwide and stop the negative stories. I have never seen so much uneducated press.

  • This week we saved a woman's home, 1 day before it was scheduled for the court steps. These stories get ZERO MEDIA ATTENTION WHY?

    Our industry helps thousands of senior borrowers every year and we're getting really fed up with these reports and irresponsible journalism!!!

  • The media is taking their cues from Consumer Report, that used to be reputable. Why?…because is easy, and they assume that anything from CR “must be true”. Media outlets need to take on the “bigger” story that CR should no longer be considered the unbiased voice of the consumer. Because, I'll bet that the biased RM article was not their first piece of bad journalism.

    Maybe an invstigative reporter ought to look into the type of articles that CR writes. That would be the bigger story if it gained any traction.

  • It continues to amaze me how people can say a reverse mortgage is the worst thing when I have seen it help so many. I have sat with families and said to the children, “Your folks are in need of financial assistance right now and have serached out other options that won’t work. Can you afford to make monthly contributions to them in an effort to preserve the home that would eventually be your inheritance? No, well do you want them to continue struggling with their expenses like they have for the last few years? No, well do think their getting a reverse mortgage is the best option they have right now or can you offer something else?

    The most unfortunate situation is the parents who want to make their decision on their own without the children as far as the industry is concerned. Those who are included in the decision may actually come up with another alternative. And, if they don’t, they at least understand the thought process that came to that decision.

    As to the bad publicity, I keep the good articles to send to customers who tell me that is a concern. However, it is sad that some reporter would use sensationalism to sell news at the cost of some Senior being afraid to do a reverse mortgage and then go through foreclosure and no longer have his or her home. They should call the reporter to help them make the payments they can no longer afford and see what alternatives he or she offers. They may not be so quick to judge without really learning the facts after that.

  • I thank the Reverse Mortgage I have. My parents also have one. My whole family, daughter and granddaughter have benefited from our reverse mortgages. Have helped ALL of us remain in our homes especially during these “crunch” times and changes in our own industry affecting our individual incomes. Sure it would be great if no one “needed” a reverse mortgage but sure are glad we have them!!! It IS important to be sure your client understands how they work, for all involved. We can do that! Can't let the sour grapes spoil the whole bunch! We must get the positive and true info out there!

  • News stories of this nature seem to come in waves. In the first few years of the industry (the early 90’s) there were very, very, few such stories about HECMs because very few HECMs were terminating, home values were slowly appreciating, and HECM marketing was minimal.

    However, there were dreadful stories due to terminations of reverse mortgages from the days when banks shared in appreciation, interest rates were substantially higher, not all reverse mortgages were nonrecourse, and when balances due went higher than home values, foreclosures were instituted. That publicity was ugly but because of the low number of those types of reverse mortgages, such stories were rare. If you get a chance talk to some HECM “pioneers” about those early days in the industry, they can provide interesting insights.

    For the first six years of this decade, things were much rosier. Home appreciation was accelerating. Here in Southern California 8% appreciation rates on Amortization schedules looked overly conservative if not distorted. What HECMs did terminate between 2004 and 2007 on the West Coast, Nevada, and Arizona properties were normally paid in full from the sale of the underlying security. We went from a period that only a few seniors had heard about reverse mortgages to an era when celebrities like Jerry Ohrbach, Pat Boone, James Garner, and Robert Wagner raised the awareness of reverse mortgages as never before with an unprecedented growth in HECM origination volume.

    Today the situation is much different.

    HECMs have been with us for about two decades but NRMLA just one.

    Our own good (and bad) marketing keeps the reverse mortgage product constantly in front of the public eye which has both good and bad aspects. More seniors are more aware of reverse mortgages than ever before. This also means, bad news will make headlines much more easily than in the past.

    As the growth of HECM terminations accelerate during and shortly after this period of dropping property values, the number of complaints by heirs, non-borrowing spouses, and those with balances due greater than home values will only grow. We all need to be prepared for the darker days just ahead.

    Over time, property values should increase and the peak of these new stories should be reached. In between we will be in for some rough sailing but with brighter days hopefully just over the horizon.

  • One positive note is the effect that HECM “short sales” are having on the Realtor sales community. These agents are waking up to the relative ease with which an upside down house can be sold, when compared to the nightmare of REO and/or true short sales. I just took an agent through the whole sale process, including getting the absent family members who had gone to assisted living to take the remaning money out of the line of credit prior to openning sale escrow.
    Direct from HUD it states that the lender goes to HUD for the balance due; if the borrower sells at a non-arms length transaction,i.e. hire a relator, and within 95% of current market value. Prove this with a sales contract, an appraisal and a HUD 1. Communicate with the lender throughout the process and the family will be fine. All this said, the agent is closing and now wants to market to others in this situation. To bad title regs in California won't allow title companies to aid in this effort. Like the other comment above, keep the lines of communiication open with the family members of all ages and engage from the get go.
    Agents selling short in this market know the toughest part is getting the family to accept the fact that they are walking with zero net sale proceeds. In the instance, that is already known and expectations are realistic. AGain, we in the industry help the families for no compensation, just doing good where evr the loan takes us.

  • Again, the keey word here is the “BROKER” steered…let's not paint the industry in a negative light due to some bad brokers out there. The Counsumer Reports article also noted a broker was at the bottom it.

  • The Rm industry is under attack. It doesn't matter if the news reports are inaccurate or biased, the damage is being done. Of course most of us in the industry know the truth about how they help, and can hopefully hold onto the success stories we have to help us through this. These attacks have the potential to damage our personal lives and relationships as well as our businesses. Something needs to be done on an industry-wide basis to counter them. NRMLA – this is your opportunity to lead.

    • I agree that NRMLA must lead. But they must also organize our opposition against such bold attacks. We've been told that we make as many problems as we solve by our protests, but we need instruction on how to make our protests change minds. We can't simply bludgeon them as they bludgeon us. Street fights (metaphorically) will not win the media or state and federal legislators over. Obviously, our national association lobbyists are not winning them over either (probably because the media only wants a good muck raking story and the lawmakers only wants to turn away attention from their own legislative morass). We need to join our forces, and make the most of our troops, because folks, we are at war and we are losing the ground we've tried for years to gain.

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