Public Radio Show Talks Reverse Mortgages with AARP, CFPB

In a radio show segment interviewing representatives of AARP and the Consumer Financial Protection Bureau, Texas Public Radio this week took a close look into reverse mortgages.

The half-hour segment on TPR’s “The Source” delved into loan options, cautions and recent product changes to make the loans safer for borrowers while gaining perspective from Dr. Lori Trawinski from the AARP’s Public Policy Institute and Nora Eisenhower, assistant director of the Office of Older Americans at the CFPB.

The guests advised caution, in particular for borrowers in response to advertising for reverse mortgages. 


“They make it seem so easy,” Trawinski said of the advertising. “I’m sure for some people, this does work out and it’s great. But it’s over-simplified [in the ads].” 

The CFPB is also looking into advertisements after finding recently that 25 times more money is spent on advertising for financial products than on education of consumers as to how the products work. 

“Some of the reverse mortgage ads highlight a luxury lifestyle to those who may be short on cash,” Eisenhower said. “[They present] easy access to enhance lifestyle in retirement. It’s a rather expensive loan product. [It can be] good designed as a bridge for income gaps, not a one-off solution. It’s part of a whole plan for later life security. I don’t think that comes through in the commercials.”

The guests also pointed to cautions around non-borrowing spouses, advising borrowers to take the loan in both spouses names, when a couple owns the home. 

“If you are living together, borrow together,” Eisenhower said, adding an additional word of caution. “This is a piece of a puzzle. There are implications for sale of home and family members. [Counseling] is the tip of the iceberg in terms of indicating how complicated this product is.”

Listen to the segment. 

 Written by Elizabeth Ecker

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  • How is the public ever going to understand this product if the people who represent it don’t get it- First- i have never originated this loan for someone who wanted to blow the money on luxury items…everyone in general wants to offset living expenses and stay in their home..many use it to increase expendable income getting rid of credit cards that have created payable debt to the tune of legalized loan sharking and you think this loan is expensive… The loan value over the years is offset by the equity growth..and compared to some homes that have lost over 50% of their equity,this is expensive? I had a lady before the market crash- we eliminated a home loan of 230,000-1600 a month- her husband had just died and she would have lost her home..her home value was 428k- a month later , home worth 197k..she ad her mortgage paid and money in her line of credit and the market will never recover that loss,,and she never has to pay this back-FHA will at the end of the day and this is risky how??As for one home buyer doing it- there are many times it is an advantage- take me for husband is 7 yrs older- if died before me i would sell anyway because i could maintain the house,and wouldn’t tie up the money I would have..I would move somewhere where the lawn is already done and more affordable-so I would use he program to re appropriate my mortgage payment to get risd of other debt-so if he died before me , i would have more expendable income to live a better lifestyle..and functionally education does not come from the ads- it comes from me, the counseling session and the information we are required to provide. When are we going to have someone to represent this product so I can stop defending it to my potential customers and blogs like this..right now there are no servicing fees and some sates like ny have no mortgage tax and the rest of the fees are the same as in any other mortgage except MIP which has been reduced. Hopefully one day they will give people the real deal-another huge perk- it protects equity that cannot disappear in the market and doesn’t show up on a credit report help some increase their credit score which is used to charge many higher premiums on their home owners insurance..that many ever pay attn to until we bring awareness to it. .Some people use this program to help them get life insurance that can help pay off balance when homeowner dies . Everyone looks at this program to see how it will work for them,,,,the information they get from radio shows etc.may bring up some truths-but moist are to deamonize a product that has helped many enjoy retirement and stop spouses from bickering over bills they can catch up on with huge interest rates!

  • Oh dear, they spend money are market. Evil capitalist. I’m sure they don’t complain that HHS spends 50x more money on getting people do sign up for Obamacare and not explaining how it works, or doesn’t work.

  • i don’t know if my first comment will be printed- perhaps I was too direct- so i will summarize- My hope is that one day-those who represent this program will do a better job, because I spend more time defending it than anything else because it is portrayed to be an unsafe and expensive loan program. How unsafe is a loan that you and your family have no personal liability to pay back. If the loan goes upside down the FHA steps in to pay THE DIFFERENCE- THE KIDS CAN STILL Take everything out of the house except for toilets sink etc. Also , I do not have one client that was taking advantage of it to blow the money on classic cars or on anything else.

    • Linda,

      Do you really believe that the product is that safe? Imagine the seniors who got HECM Standards to pay off existing morgages, did not have the money to pay taxes and insurance and have lost or will lose their home in foreclosure or some cousin to it (short sale, deed in lieu of foreclosure, etc.). First, they lost the right to live in the home and second, have little, if any, proceeds coming to them on the sale of the home.

      Then we have a court of appeals agreeing that HUD violated the law by not protecting non-borrowing spouses from displacement when the borrowing spouse passed away. Why did HUD take such an outrageous position?

      So imagine spouses who thought that 12 USC 1715z-20(j) protected them from displacement upon the death of the borrowing spouse. But it turns out HUD forced these protected seniors out of their homes by endorsing as HECMs reverse mortgages which did not protect against displacement of these seniors. As to what we or counselors told these seniors, the law is clear,;they are protected from displacement just as the court of appeals ruled.

      Then we have seniors who did not spend their proceeds prudently and needed a significant portion of the value of the home to support them when they could no longer live in their homes. As home values bottomed, these seniors could no longer live in their homes but had so much debt and so little value that got little or nothing when their homes were sold.

      We could go on and on but do not think that HECMs are that safe for everyone. They are not.

  • The segment was very confused and confusing. While one participant was concerned that borrowers understand reverse mortgages as a loan, it was also stated that a reverse mortgage works like a mortgage except in reverse. Since when does a reverse work like a mortgage except in reverse? A reverse mortgage is no different than any other nonrecourse mortgage which allows negative amortization and cash out to the borrowers. Another person declared that HECMs are also known as reverse mortgages but the truth is HECMs are a specific type of reverse mortgage.

    Then a participant declared that there were 50,000 reverse mortgages created last year when the fact is there were over 60,000. Then we hear how the industry is encouraging seniors to have a luxurious lifestyle in its marketing; while that is true for those who advise us to partner with RV and boat retailers, by and large that is false in 2014.

    Then comes the very limited concept that HECMs are for the house rich and cash poor and somehow HECMs are designed to be an income gap filler, a very false concept. HECMs are designed to improve cash flow.

    Then comes the lie that the average HECM borrower used to be in the mid 70s but today is in the early 60s and there is something wrong with that. While the information about the past is fairly accurate, the fact is the average age of the YOUNGEST borrower is not below 70 today. Where do industry leaders and AARP come up with this statistical heresay and rumors? Even NCOA which skewed counseling information made it clear that the age of the average counselee within a very specific three month or so period were in their 60s. Counselees and actual borrowers are two different things. Then one person said that if the senior was out of the home for six months a HECM would go into due and payable status, yet we all know that with illness the time frame is one year. While the participants got it right that condo and townhouses are normally subject to HOA dues that must be paid, the same is true for many gated communities of site built homes.

    Finally the subject of costs came up. The participants talked about interest rates being higher than forward mortgages which may be true particularly with fixed rate HECMs but they also did not describe the risk of negatively amortizing mortgages. Then they went into upfront costs as too expensive especially if the loan is for less than 2 years. With the life of the AVERAGE HECM now exceeding eight years, how is that concept even germane except as a warning not to take the loan for a short period of time.

    All in all, the presentation deserved a D+ at best.

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