CBS News’ Gayle King Rehashes Times Reverse Mortgage Story

In recapping a New York Times article this week on reverse mortgages, CBS News’ Gayle King discussed default rates among reverse mortgage borrowers as translating to more seniors getting pushed out of their homes on its CBS This Morning show. 

Lenders are targeting older Americans by promising free money without explaining the risk, according to federal and state regulators, CBS said. The segment follows a front page NY Times article that outlines the risks associated with reverse mortgages, citing a Consumer Financial Protection Bureau industry report.

The default rate reached its highest level to date at about 9.5% of the loans, up 7% compared to 10 years ago, King noted.

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Click here to watch the segment.

Written by Alyssa Gerace

 

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  • Like so many others, Ms. King is out of date when she suggests that the default rate is 9.4%.  The trouble is that information is not updated monthly.  She is also marginally right to say that the problem is 7% higher today.  The truth is the rate is 475% times what it was claimed to be back then.  The truth is no one knows what it was back then.

    Ms. King overstates the case that lenders were targeting seniors by promises of free money but it certainly brings into question the nonsense we heard from some lenders advertising on TV about the house working for the senior or the house in some way paying the senior.  These are mortgages not some kind of equity conversion.HECMs allow for equity conversion but no lender in their right mind is offering to acquire appreciation rights even though HUD allows such features.  The most common type of HECM being currently originated is a fixed rate, option pay, negatively amortizing mortgage, plain and simple.  Only a minority of borrowers choose the rather sophisticated and beneficial line of credit but that requires accepting an adjustable rate HECM instead.

  • My friend Dave – my mentor in the Mortgage industry and long time friend, met with Geri, a 67 year old family member of his today.  Dave only does Forwards, but understands Reverses well, and thought a Reverse Mortgage provided the best solution, but Geri wanted to hear from both of us.  Dave did his presentation, and put together quotes for a 15, 20 and 30 year conforming program, then I did mine.  Geri was very apprehensive, and brought up the New York Times article she read the day before (she has been doing a lot of internet based research recently).  She didn’t want any of the dreadful things that happened to the folks in the article to happen to her.  We talked about it for a while, and she listened with an open mind, but I could tell she was fearful, even though she trusted me.  She selected the 20 year forward mortgage.

  • Remarks by the CBS reporter:  “targeted by crooked lenders” and “left off the deed by lenders”.  Glad my clients would never describe me or my employees that way!  Are there actually lenders out there that encourage homeowners to take the younger borrower off title??  I’d be shocked if there are.  If there are, it’s my understanding that the consequences of doing that are covered in the mandatory counseling.  Regardless, the damage to the RM industry is being done by the media.

  • I just had a similar situation to Raymond’s.  The borrowers choose the forward rather than the reverse.  It looks like we have scared off the borrowers that have a choice and will end up with only the borrowers in absolute need.   Let’s get serious and get the aggressive and misleading marketers out of the business, but first, let’s get them out of NRMLA.  Then we need to start at the beginning again and educate, educate, educate!  And if a LO does not fully understand and is not able to explain the ARM LOC, then they should not be an LO for reverse mortgages. If we do not get serious now, I am afraid we will not have a program to protect in the future.

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