A Kansas City local news column has changed its story on reverse mortgages after receiving feedback about a previous column discussing the loan, its shortcomings and uses.
In response to a letter from National Reverse Mortgage Lenders Association President and CEO Peter Bell, author Elliot Raphaelson penned a follow up article noting that there was an error in the original report. He noted various points brought by NRMLA and addressed each one in the second column.
Mr. Bell emphasized that reverse mortgages are structured as non-recourse loans, and that borrowers will never owe more than the current value of their home. That is true, and I stated in column that “as long as a property is sold at a fair market price, the lender cannot claim more than the amount received.”
However, there was an error in an example I gave. I stated that when an individual lives outside the home for 12 months — an event that allows the lender to foreclose — the borrower had to “repay the difference between the outstanding loan balance and the proceeds of a sale.” A more accurate statement would have been that the lender could initiate foreclosure proceedings, and the borrower might have the option of repaying the outstanding balance (if he wanted to remain in the home) or selling the home. If the home were sold at prevailing market prices, the borrower would not owe the lender more than the current value of the home.
Mr. Bell also took issue with my claim that “many lenders use high-pressure techniques to market reverse mortgages.” Yet Minnesota Attorney General Lori Swanson has stated that reverse mortgages “are often peddled aggressively without regard to suitability.” The Consumer Financial Protection Bureau (CFPB) stated in its June report to Congress that “misleading advertising remains a problem in the industry, and increases risks to consumers. This advertising contributes to consumer misinformation about reverse mortgages increasing the likelihood of poor consumer decision-making….”
Read the full column at KansasCity.com.
Written by Elizabeth Ecker