State Attorney General Issues Reverse Mortgage Alert

South Dakota Attorney General Marty Jackley’s office this week issued a consumer advisory on reverse mortgage offers, alerting consumers to be cautious when considering reverse mortgage options.

The alert was a proactive measure, a representative from Jackley’s office told RMD, rather than a direct response to consumer complaints or specific concerns raised with the Attorney General.

“It is something we have been thinking of for a while,” the spokeswoman told RMD. “It was more of a heads up.”

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In announcing the alert, Attorney General Jackley stressed the need for a thorough research process.

“In the event a senior is considering a reverse mortgage, I am encouraging seniors to closely examine all requirements and to seek further assistance in making such a significant decision,” said Jackley. “Before entering into a reverse mortgage seniors should understand the types of reverse mortgages that are available, know the costs and fees associated with reverse mortgages, and understand any additional obligations for these mortgages.”

The advisory addresses several components of reverse mortgage research including work with a financial adviser, attending reverse mortgage counseling, understanding costs, fees and insurance and comparing different offers from different lenders.

View the advisory.

Written by Elizabeth Ecker

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  • Maybe we need a trade association that can take the time to inform these well intentioned folks before they run out and whip up a bunch of new laws about things they don’t understand.
    It should seem obvious by now to our industry that State Legislatures and well intentioned Governors and State Atty’s General can and will make rather unfortunate decisions if left alone to think these things through. 
    Better to be proactive rather than reactive and it makes sense to demand that our trade association take on this task, better late than never.

    • hecmvet,

      Your concerns are valid.  However, this is not 2009 or even 2010.  

      The assets at our trade association have been depleted year by year.  The net assets have fallen from about $2.1 million at the end of 2007 to about $1.2 million as of the end of 2010 (the latest Form 990 offered online by nonprofit organization watchdogs).  So with the loss of Wells Fargo and Bank of America and lower endorsements over the last 24 months, do you believe that NRMLA is in a better financial situation today than it was as of January 1, 2011?

      NRMLA is not only a nonprofit with a management company running it but it is also a strong volunteer organization much of whose work is accomplished by committees.  If you cannot change the way of running the organization from the outside then you should work from within.

      For an organization to be proactive is far more costly than being reactive.  Also there is no guarantee that being proactive will not make some situations worse.  We are a tiny industry which like the mouse is trying to roar but we are still no lion.

      Look at the AICPA, it collects several hundred dollars in fees from its individual members and even greater fees from the firms which belong to it.  In California alone there are tens of thousands of members.  If you have not looked over the public financial information about NRMLA, you should.  It helps to show why our voices are not heard more than they are but at the same time it shows how much are voices heard despite the small size of the industry and the budget NRMLA has to work with.  All in all NRMLA does a very competent job.

    • NRMLA monitors all press coverage of reverse mortgages on a daily basis and routinely responds to columnists, reporters, editors, public officials and others who misspeak while writing about or discussing reverse mortgages. We jokingly refer to ourselves (within our office) as the Reverse Mortgage Anti-Defamation League.)

      Unfortunately, this type of activity takes up a disproportionate amount of staff time, taking time away from other activities that we would prefer to be working on, but it is, of course, an important part of what we do.

      We also reach out to organizations like tthe National Association of Attorneys General, the Conference of State Bank Supervisors, etc. to get on their agendas and educate them about how reverse mortgages really work and the commitment to ethical behavior among our members.

  • Does anyone else have a problem with the following inaccurate statement from the advisory?  I am surprised it wasn’t addressed by RMD.

    “Under a typical arrangement, the lender places a lien on the property in
    exchange for the cash it provides to the borrower. This allows the lender to
    reclaim the loan, fees and interest, by selling the home after it is
    vacated.”
     

    • You are right that what is missing in the quotation is the foreclosure process.  A lien provides no equity ownership or any “equity conversion” rights to the lender.  A HECM is not equity release; it is a mortgage.

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