Abuses found in reverse-mortgage marketing, may spawn new financial crisis
Oct 7, 2009 at 12:00 AM
According to a San Francisco Chronicle report, reverse mortgages, which let seniors cash out home equity, have the potential to spawn another subprime-style financial crisis."We're seeing some of the same types of abuses that happened in the subprime market - perverse incentives to sellers, deep-pocket players, taking a product designed to fill a particular need for a particular group and pushing it as a commodity loan," said Rick Jurgens, a contributing author of the report from the National Consumer Law Center, a Boston nonprofit that represents low-income people.The report cited aggressive marketing tactics, and said seniors are sometimes pressured to use reverse mortgages to buy inappropriate financial products, such as annuities. "There should be suitability standards that oblige anyone who arranges a (reverse mortgage) transaction to show they are acting reasonably in the senior's interest," Jurgens said. "That would damp down aggressive selling and winnow out those there to make a quick buck."Read the full report at the San Francisco Chronicle's web site.