The National Consumer Law Center released a report titled “Subprime Revisited: How the Rise of the Reverse Mortgage Lending Industry Puts Older Homeowners at Risk,” which according to the press release shows that abuses from the subprime mortgage market have begun showing up in the reverse mortgage industry.
“In the reverse mortgage market, seniors face some of the same aggressive lending practices that were common in the subprime lending boom,” said Tara Twomey, an NCLC attorney and author of the report. “Well-funded marketing campaigns and perverse incentives to brokers are targeting seniors’ home equity and using reverse mortgages as their tools”
The NCLC report notes that “Many of the same players that fueled the subprime mortgage boom — ultimately with disastrous consequences—have turned their attention to the reverse market. Lenders, including some of the nation’s largest banks, view that market as a source of profits that have dried up elsewhere. Mortgage brokers see it as a new source of rich fees. Predators who once reaped profits from exotic loans have now focused on wresting more wealth from vulnerable seniors. And securitization, which allowed subprime loan originators to disassociate themselves from the downside risks of abusive lending, is becoming commonplace in the reverse mortgage industry.”
U.S. Senator Claire McCaskill said today’s report validates the need for regulatory improvements in this industry in order to protect America’s seniors as well as our tax dollars. “We’ve seen this movie before and it didn’t have a pretty ending. Abuses in the subprime lending market almost brought down our economy. Now we’re seeing similar abuses with reverse mortgage lending – something needs to be done before more lifesavings are depleted and more tax dollars are drained,” Sen. McCaskill said.
You can read a copy of the report here.