The process by which seniors obtain reverse mortgages needs to change according to the Center for Responsible Lending (CRL).
The consumer group submitted a range of comments to the Consumer Financial Protection Bureau (CFPB) in response to the agency’s request for information related to senior financial exploitation. CRL said it’s concerned about products that contribute to asset depletion, saying that reverse mortgages need to be taken out with caution.
The group suggests that the reverse mortgage application process could be improved if potential borrowers first sought product information from a third party resources, rather than beginning the process through interaction with a lender.
“For most seniors, their home is their greatest asset, and tapping into the equity of that asset should not be done without careful consideration,” the comments state.
Borrowers first should access unbiased information from groups such as AARP, the National Council on Aging, or even the CFPB said the group.
“This information should advise seniors to also consider other options, such as cutting back on expenses, selling their house and downsizing, applying for public benefits that may be available to them, or taking out a home equity line of credit,” said CRL in the comments.
After reviewing the information, borrowers should then receive counseling in person if possible. Only after counseling should borrowers contact lenders and move forward with the loan origination process.
“Unfortunately, often the process is very different, with seniors often learning about reverse mortgages from late-night television ads that urge them to call lenders directly.”
Additionally, CRL points to counseling, product choice, foreclosure risk, and taking a homeowner off home title as areas of concern regarding reverse mortgages. It cites several of these concerns as evidenced in findings by a recent report on the reverse mortgage industry conducted by the CFPB.
Written by Elizabeth Ecker